Shares of Avenue Supermarts Ltd, operator of DMart, dropped over 3.6% today to trade at ₹4,566.95 following a mixed reaction from brokerages on its Q2FY25 business update. The company reported a 14% year-on-year rise in standalone revenues to ₹14,050 crore for the quarter ended September 2024. However, concerns were raised regarding the pace of growth.
Morgan Stanley maintained an ‘Overweight’ rating on Avenue Supermarts with a target price of ₹5,769, noting that the revenue growth was slower than anticipated but operational metrics showed improvement. The firm awaits further clarification from the management in the upcoming Q2 results.
Macquarie rated DMart as ‘Outperform’ with a target price of ₹5,600, pointing out that store additions and sales growth have slowed. They anticipate a sequential decline in gross margins due to changes in the product mix.
Goldman Sachs took a bearish stance, maintaining a ‘Sell’ rating with a target price of ₹4,050, highlighting a slowdown in growth, attributed to a rise in quick commerce and a decrease in Same Store Sales Growth (SSSG).
Citi also echoed a negative sentiment with a ‘Sell’ rating and a target price of ₹3,350, suggesting that throughput is being affected by an unfavorable product mix and store additions.
As of September 30, Avenue Supermarts operated 377 stores across the country, adding six new stores in the quarter. Analysts at Goldman Sachs pointed out potential risks in store expansions and growth estimates. The company aims to add 45 stores in FY25 within a medium-term target of 45-60 stores per year.
