D-mart shares soar to record high on strong Q1 results, should you buy or sell shares?

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July 31, 2018 12:08 PM

Shares of billionaire Radhakrishnan Damani-led Avenue Supermarts soared to record high levels on Tuesday, after the company posted strong Q1 results.

Avenue Supermarts has reported a 43.4% surge in net profit at Rs 251 crore for June quarter.

Shares of billionaire Radhakrishnan Damani-led Avenue Supermarts soared to record high levels on Tuesday, after the company posted strong Q1 results. Avenue Supermarts has reported a 43.4% surge in net profit at Rs 251 crore for June quarter. Avenue Supermarts, which runs the D-mart chain had reported Rs 175 crore profit in the year-ago quarter.

Avenue Supermarts shares were trading at Rs 1,646.75, up by more than 3%. Notably, ever since its IPO in March-17, Avenue Supermarts shares have been on a rising spree. Now, more than an year later, the shares have risen by more than 410%. The firm had a blockbuster IPO with shares listing at Rs 603, as against the issue price of Rs 299.

Taking stock of the results reported in the quarter, Jefferies said that the company remains the primary beneficiary in the organised grocery retail space. Jefferies said that strong execution continues despite increase in competition for the grocery retailer. Jefferies has raised topline & EBITDA estimates by 3 percent/5 percent & 3.7 percent/5.4 percent for FY19/20. Jefferies has a hold rating on the shares, with a target price of Rs 1,470.

JP Morgan said that the company had a good June quarter performance. However, the firm said that the valuations are expensive. While lower interest costs further boosted net profit growth, the stock is already factoring in optimism. JP Morgan has a target price of Rs 1,175 on the shares with an underweight rating.

Citi has a sell rating on the shares, with a target price of Rs 1,255. Citi said that the results have captured medium-and-long-term growth / return outlook. “The current valuations for DMart will require the company to grow at over 50% for the next year continuously while generating strong free cash flows. This is unlikely. While it is true that strong growth will continue, the current valuations reduce future returns potential as most of the positives are already built in,” investment advisor Sandip Sabharwal told FE Online in April this year.

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