DMart Q1 result impact: Stock jumps 4% intraday on six-fold surge in profit; brokerages bullish, check target prices

Shares of Avenue Supermarts (DMart) jumped almost 4 per cent to Rs 4091.9 per share on the BSE intraday trade on Monday after the company reported a six-fold surge in profit and revenue almost doubled during the first-quarter earnings of the financial year 2022-23 (Q1FY23). 

The net profit of DMart surged around six-fold to Rs 680 crore year-on-year and total revenue at Rs Rs 9,807 crore, up 95 per cent in Q1FY23. Similarly, EBITDA grew almost four-fold to Rs 1008 crore and margins grew over 10 per cent from 4 per cent in Q1FY23. 

IDBI Capital maintained a Buy rating with a target price of Rs 4,571 per share, which implies a 16 per cent upside. The brokerage has marginally adjusted EPS estimates upwards by 3-4 per cent during FY23-24E as it expects a better revenue mix from the modern large-size stores. 

The company is a consistent compounder with the stock price increasing at 35 per cent CAGR in the last five years and continues to remain India’s most profitable low-cost retailer, a strong play on India’s retail growth story, domestic brokerage firm ICICI Direct said in its Q1 review note. 

The brokerage maintained a Buy recommendation on the stock with a target price of Rs 4700 per share (19% upside) from Rs 4530 per share i.e. 5.5x FY24E EV/Sales. It said the results were a comprehensive beat on the profitability front driven by sustained improvement in product mix. 

Meanwhile, Motilal Oswal said DMart’s strong growth footprint and cost optimization led to a healthy EBITDA/PAT CAGR of 19%/26%, however, revenue/sq. ft. remains under pressure due to the impact of inflation on the Discretionary category and higher store sizes. 

The brokerage factor in a strong FY22-24E EBITDA/PAT CAGR of 37%/50%, with a 17% footprint CAGR, and cognizant of the prominence of new age grocery models, rich valuation, and weak revenue per sq. ft. in the last few quarters. It gives a Neutral stance with a target of Rs 3500 apiece.