DMart shares under pressure after Q4 EBITDA, margin fall short of Street estimates

DMart share price: Avenue Supermarts shares fell on Monday after the Mumbai-based retail chain operator – which runs DMart stores – reported a mixed set of financial results for the quarter ended March 2023 with a 100-basis-point decrease in margin. DMart shares dropped by as much as Rs 179.2 or 4.9 per cent to Rs 3,501.1 apiece on BSE. 

Analysts say the company continues to see better revenue growth in FMCG and staples than general merchandise and apparel units, which were marred by lower consumer spending. 

DMart Q4 results: Summary 

On Saturday, Avenue Supermarts reported a net profit of Rs 505 crore for the January-March period, meeting analysts' estimates. The quarterly net profit was up eight per cent on a year-on-year basis. The company reported 20 per cent growth in revenue to Rs 10,337 crore for the three-month period compared with the corresponding quarter a year ago, according to a regulatory filing. 

DMart reported Rs 783 crore in earnings before interest, taxes, depreciation and ammortisation (EBITDA), up six per cent on a year-on-year basis but less than analysts' estimate.

Avenue Supermarts' margin — a key measure of profitability — contracted to 7.6 per cent for the three-month period from 8.6 per cent for the year-ago quarter.  

According to Zee Business research, DMart's quarterly net profit was estimated at Rs 495 crore, EBITDA at Rs 799 crore and margin at eight per cent. 

Analysts say growth in general merchandise and apparel is key to margin growth for the company. 

Meanwhile, DMart added 18 stores in the March quarter and 40 in total in the full financial year, according to a company statement. 

What to do with DMart shares

Zee Business analyst Ashish Chaturvedi has a long-term 'buy' recommendation on DMart. He has a target of Rs 4,600 for the stock with a perspective of 12-18 months.

Chaturvedi's target implies a potential upside of 25 per cent in DMart shares from their closing price on Friday.

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