Avenue Supermarts slumps up to 9% on weak Q2: Should you buy, hold or sell DMart shares?

DMart share price: Shares of D-Mart parent company Avenue Supermarts are in focus in Monday's session as the company posted weak Q1 amid growth in the online and quick commerce (QC) space. The revenue during Q2 period rose 14 per cent to Rs 14,444.5 crore still better than estimates by a marginal. Margins, however, took a hit and came in at 7.6 per cent versus 8 per cent reported in the same quarter last year.

Of the key product categories, the company's share in revenue remained almost muted year-on-year.

According to the company's investor presentation, it added as many as 12 stores in the first half of FY2025.

The company's like-for-like (LFL) growth has deteriorated considerably from 9.1 per cent in June quarter to 5.5 per cent in the September quarter.LFL growth means the growth in revenue from sales of same stores which have been operational for at least 24 months at the end of the reporting period.

Should you buy, sell or hold DMart shares?

Citi continues with its sell rating and a reduced target of Rs 3,500.

Meanwhile, Morgan Stanley double-downgraded the stock to Underweight from Overweight. Also, it slashed the target price on the stock significantly from Rs 5,769 to Rs 3,702. The brokerage said that the company's Q2 results missed our top-line and margins expectations. 

Furthermore, commentary about competition from online grocery formats puts doubt on 20 per cent top-line growth. This could lead to further de-rating Online and offline can co-exist, but defenders cannot stay defensive, added Morgan Stanely.

Growth disappointment triggers reduction of expectations until the company builds more than one lever of growth.