Brokerages divided on Avenue Supermarts shares despite robust Q3 earnings – check target prices

Despite robust third-quarter earnings, the brokerage houses are divided on Avenue Supermarts’ shares. The counter on Monday corrected over 2 per cent to Rs 4624 per share on the BSE intraday.  

The company reported around 24 per cent year-on-year (YoY) growth in consolidated net profit at Rs 553 crore during the December-end quarter as against Rs 447 crore in the same quarter a year ago.  

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While the consolidated revenue grew over 22 per cent YoY to Rs 9,218 crore from Rs 7,542 crore in the year-ago quarter; similarly, margins saw a minor growth of 30 basis points to 9.6 per cent from 9.3 per cent YoY as per Avenue Supermarts filing to exchanges on Saturday. 

Maintaining an Underweight stance, JP Morgan keeps the share price of Avenue Supermarts unchanged to Rs 3955 per share as of Q3 miss marginally as adverse mix weighs on gross margins.  

“Rising Omicron incidence in large cities poses near-term risk to store footfalls/product mix and hence revenue offtake, though DMART Ready scale-up should help mitigate,” the brokerage said. 

Jefferies raised the share price target of Avenue Supermarts to Rs 3800 per share from Rs 3700 per share as the company reported in-line third-quarter results. It maintains an Underweight stance. 

“Gross margins dipped slightly YoY due to adverse mix although cost control measures helped and EBITDA margins expanded marginally. The store adds at 17 was multi-quarter high,” the brokerage said. 

On the other hand, Macquarie sees the share price be surging to Rs 5450 per share while giving an Outperform stance for Avenue Supermarts. It said, “Q3 PAT (profit-after-tax) below estimates as adverse mix drives gross margin miss, while FY22/23/24 EPS cut 4 each to factor Q3 miss.”  

“DMart remains better positioned in an inflationary environment given its low-cost operations and competitive prices,” the global brokerage firm said in its report.