D-Mart shares plunge despite a 73% jump in Q4 net profit; what brokerages say

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Published: May 7, 2018 3:37:49 PM

Shares of billionaire Radhakishan Damani promoted Avenue Supermarts plunged by as much as 3.5% on Monday, despite at 73% jump in profits in the March quarter.

Avenue Supermarts, which runs the D-Mart chain has reported  a net 73% on-year rise in net profit to Rs 167 crore for the January-March 18 period.

Shares of billionaire Radhakishan Damani promoted Avenue Supermarts plunged by as much as 3.5% on Monday, despite at 73% jump in profits in the March quarter. Notably, Avenue Supermarts, which runs the D-Mart chain has reported  a net 73% on-year rise in net profit to Rs 167 crore for the January-March 18 period. However, these results are seen to be below market expectations. “D-Mart 4QFY18 net profit of Rs 1.7 billion was below estimates due to slower-than-expected revenue growth of 22.5 per cent year on year and lower margins,” brokerage firm Kotak Securities said in a report.

Notably, the total revenue for the quarter came in 22.5% higher on year at Rs 3,810 crore. The company had clocked Rs 3,111 crore sales in the same period last year. According to Jefferies, SSSG (Same Stores Sales Growth) at 14.2% was decent in value but below expectations. “Deflation in staples, tax rates not being comparable, store addition not in line with expectation and base effect of demonetisation have made March 2018 revenue a little tepid. Grooming talent and store addition shall continue to remain two main challenges as well as focus areas for the company,” Neville Noronha, CEO of Avenue Supermarts noted.

Notably, the firm has a hold rating on the shares with a target price of Rs 1,370 per share. “The increase in store count in FY2020 drives an increase of 1.4 per cent in our EBITDA estimate, though lower other income leads to an EPS cut. The EBITDA increase drives an increase in our DCF-based target price from Rs 810 to Rs 835. Valuations at 73 times FY2020E P/E remain expensive; retain SELL,” Kotak Securities said in its note. According to Jefferies, the stores expansion picked up in Q4 to 14, taking the total additions to 24 in the FY18.

Motilal Oswal Securities has increased its new store addition estimate to 27 stores in FY2019 and 30 stores in FY2020 from 25 stores earlier, while at the same time retaining its sell call on the shares with a target price of Rs 920.

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