Shares of Avenue Supermarts, the parent firm of retail chain D-Mart, slipped 5% in early deals on Friday after the company reported a 14.2% rise in standalone revenue in Q2. Revenue from operations stood at Rs 14,050.32 crore for the September quarter against Rs 12,307.72 crore in the corresponding quarter of the previous fiscal year (Q2FY24). Revenue came at Rs 10,384.66 crore in Q2 FY23 against revenue of Rs 7,649.64 crore in Q2 FY22.
The stock fell 5% to Rs 4701.90 today against the previous close of Rs 4940.20 on BSE. Market cap of the firm fell to Rs 3.10 lakh crore. As of September 30, 2024, the total number of stores operated by the company stood at 377.
Revenue per store came at a 2.9% CAGR over five years, showing only a 2.2% YoY growth compared to Citi's projection of 6.5%.
The brokerage is cautious on the stock, given its current valuation.
Global brokerage firm Citi has maintained its 'sell' rating on the stock with a target price of Rs 3,350. The 14.2% year-on-year (YoY) Q2 revenue growth fell short of Citi's estimate of 19%.
Another global brokerage Goldman Sachs also reatined its 'sell' rating on the stock with a target price of Rs 4,050 post Q2 updates. The brokerage cited a significant moderation in growth, driven by a slowdown in same-store sales growth (SSSG).
This slow growth is likely due to the rapid expansion of quick commerce players. The brokerage also said that the store addition target may be at risk and has adjusted its FY25/26/27 earnings per share estimates down by 2% to reflect lower-than-expected revenue growth.
Another global brokerage Morgan Stanley has retained its 'overweight' stance on the stock. It assigned a target price of Rs 5,769. While the standalone Q2 revenue did not meet estimates, operational metrics showed improvement, albeit at a slower rate, said the brokerage. Similarly, Macquarie also holds an 'overweight' rating on the stock, with a target price of Rs 5,600 per share.