D-Mart shares down 11% this month, in oversold zone; here’s the new target price

Shares of Radhakishan Damani-owned D-Mart (listed as Avenue Supermarts) have tumbled 11% this month, leaving investors guessing about movement in the large cap stock. D-Mart stock, which closed at Rs 4,322.2 on October 31, 2022 fell to a low of Rs 3,874 today, translating into a loss of 11.56% during the period. On the other hand, the 30-stock Sensex has gained 0.90% in November.

That’s a considerable amount of loss for the industry leader when compared on a year-to-date basis and yearly basis.

D-Mart shares have fallen 19.44% in a year and lost 16.7%  in 2022. In a month, the stock is down 8%.  D-Mart stock is the top loser this month compared to its listed peers. While shares of Trent  Ltd are down 8%, Metro Brands stock has lost 7.94%  during the period. V-Mart (8.77% ) and  Arvind Fashions (7.02%) shares are among the other industry losers this month.

Currently, the stock is trading in an oversold zone and has high valuation. The relative strength index (RSI) for the firm stood at 21.8. A value below 30 indicates that a stock is oversold and a value above 70 signals that the scrip is overbought. The price to equity value of the stock stands at 111 higher than industry PE of 104.46 indicating that the stock is overvalued.

In the second quarter of this fiscal, Avenue Supermarts reported a 64.13 per cent rise in its consolidated net profit at Rs 685.71 crore against Rs 417.76 crore profit in the corresponding quarter a year ago. Revenue from operations jumped 36.58 per cent at Rs 10,638.33 crore during the quarter under review as against Rs 7,788.94 crore in the corresponding quarter last fiscal.

In today’s session, the share of D-Mart’s operator touched an intraday high of Rs 4022.65 , gaining 3.62 per cent on BSE.  The stock has has gained after 9 days of consecutive fall. Total 0.11 lakh shares of Avenue Supermarts changed hands amounting to a turnover of Rs 4.51 crore on the BSE.

Market cap of the firm rose to Rs 2.56 lakh crore on BSE. Avenue Supermarts stock is trading higher is trading lower than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

Here’s a look at what analysts said on the prospects of the stock.

Ravi Singhal, CEO, GCL said, "We see demand growth getting subdued. On other hand, margins are under pressure in this quarter. Store growth sales have also come down. But now inflation is under control. So in the coming quarters, margins will increase. Rs 3600 levels are very good to enter with a stop loss of Rs 3,400  and target of Rs 4,400 for the next one year."

Manoj Dalmia, founder and director, Proficient Equities said, "The stock looks weak and might undergo selling pressure. We can expect a downside level of Rs 3224, where investors can start accumulating. Currently one can avoid heavy buying."

Ravi Singh, Vice President and head of research, Share India said, "The fall in Avenue Supermarts’ shares comes after the company reported a decline in its margins on account of rising expenses, slower footfall recovery and inflation impacting its more profitable discretionary non-FMCG segment. Another challenge the company faced was the falling revenue per square feet. Weak market sentiments and fears of recession dragged the markets down, contributing to more fall in the D-Mart share price. The share price may witness more correction in the near term to the levels of  Rs 3500. Investors may exit their positions from the counter and wait for the sentiment to turnaround."

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Abhijeet from Tips2trade said, “Despite decent Q2FY23 results and a very consistently growing business, D-Mart stock price is considerably down this month. Currently, the stock price is very oversold and long-term investors should buy if we get a green candle on the daily charts for near term targets of Rs 4210-4308."

Rajesh Sinha, senior research analyst at Bonanza Portfolio said, “D-Mart’s stock price corrected by 11% in the month of November 2022. However, looking at its fundamentals and growth outlook, D-Mart is value buying for medium to long term. D-Mart opened 126 stores over the last 3.5 years. It added eight new stores during Q2FY23, taking its total store count to 302 as at H1FY23. We believe, D-Mart is well placed in the domestic retail industry with its strong execution capabilities, lower cost of operation, streamlined distribution network aiding it to penetrate into newer markets and focus on quasi-Omni channel strategy through D-Mart Ready. The organised grocery retail industry penetration is at 4-5% in India giving enough headroom for D-Mart to grow. We advise investors may consider any dip in the stock price of D-Mart to invest for medium to long-term prospective.”

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