D-Mart operator Avenue Supermarts surges around 4%, but Citi maintains 'Sell'; here is why

D-Mart share price Q2 business update, Avenue Supermarts share price NSE BSE: Shares of Avenue Supermarts, the entity that owns and operates the supermarket chain D-Mart, surged as much as 3.82 per cent to hit a high of Rs 3,864.90 apiece on the BSE in the early trade on Wednesday, October 4, a day after the company shared its Q2FY24 business update. The stock finally ended at Rs 3,871, up 3.99 per cent.

The company said its revenue during the July-September period of the current fiscal came in at Rs 12,307.72 crore, up 18.5 per cent against Rs 10,384.66 crore registered in the corresponding quarter of the previous fiscal. The total number of stores as of September 30, 2023, stood at 336.

Shares of the Radhakishan Damani-founded company, which was once a solid wealth creator, have declined more than 13 per cent over the past 12 months. In comparison, the benchmark S&P BSE Sensex has gained over 12 per cent during the window. 

Global brokerage Citi, in its research report, post-Q2 business update, said that there are no signs of throughput recovery yet. The brokerage believes that revenue/sq ft continues to be impacted by an inferior product mix. It further highlighted that the company added only nine stores during the quarter and that it remains cautious of the stock at its current value. 

However, Macquarie has maintained an 'overweight' rating on the stock with a target price of Rs 4,550. The brokerage notes that the company's Q2 store additions and sales growth are broadly in line with their estimates. Further, its four-year sales compound annual growth rate (CAGR) has risen marginally from Q1 levels. The marginal uptick in sales momentum was led by a gradual recovery in the high-margin apparel segment, the brokerage adds.

D-Mart Q1 Results 

The retail chain D-Mart operator Avenue Supermarts reported a 2.46 per cent rise in its consolidated net profit at Rs 658.71 crore for the April-June 2023 quarter, as lower sales of apparel and general merchandise impacted margins. The company had posted a net profit of Rs 642.89 crore in the corresponding quarter a year ago, said Avenue Supermarts in a BSE filing.

Its revenue from operations was up 18.20 per cent to Rs 11,865.44 crore during the quarter under review as against Rs 10,038.07 crore in the same quarter last fiscal.

Avenue Supermarts' total expenses were at Rs 11,006.92 crore, up 19.74 per cent in the first quarter of FY24. During the June quarter, D-Mart opened three new stores, taking the total count to 327 with a retail business area of 13.5 million square feet.

D-Mart operates across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.