DMart’s share price tanked 2.3% in trade on Monday mornings as the street factored Avenue Supermarts’ disappointing quarterly earnings. The stock price tumbled to Rs 3,750.05 apiece from Friday’s closing. The hypermarket operator reported a 2.3% rise in its net profit for the first quarter, at Rs 695.36 crore. In the corresponding period last financial year, the net profit stood at Rs 642.89 crore.
DMart’s Q1FY24 revenue from operations rose by 18.2% to reach Rs 11,865.44 crore, surpassing last year’s Rs 10,038.07 crore. The company’s total income during the period totalled Rs 11,904.18 crore, while Q1FY24 expenses stood at Rs 11,006.92 crore, clocking a 19.7% increase on-year.
Outlook on DMart stock price
“We cut EPS estimates of D’Mart by 3%/1.5% for FY24/25 and target price to Rs4587 (Rs4651 earlier) following disappointing margin performance led by 1) deterioration in sales mix given lower sales in General merchandise and apparel and 2) structural competitive pressures from mass market apparel players (Zudio, Reliance Trends). D’Mart needs to restructure its apparel business given new threat perception, which will take a few quarters for turnaround. We expect growth pressures to sustain in 2Q also before recovery in 2H24. D’Mart lacks near triggers, although the stock remains a long term Buy,” said Prabhudas Lilladhar in a report.
“1QFY24 result was below consensus expectations, which was not a surprise. Revenue growth of 18% on-year (vs 12% retail area expansion) is un-exciting. Under-recovery in general merchandise and apparel (still below pre-pandemic levels) continues to be a drag on gross margins (decline of 125 bps YoY). We reckon DMart is a platform business and the downside of this underperformance (in apparels) is limited while all other strengths of the company remain intact. HOLD,” said ICICI Securities.