Avenue Supermarts shares slip 4% after Q2FY24 results; should you buy, hold or sell the stock?

Avenue Supermarts share price: Shares of Avenue Supermarts, which runs the famous retail chain D-Mart, slipped as much as 4 per cent in early trade on Monday (October 16) to the day’s low of Rs 3771.7 apiece after reporting a weak set of numbers for the September-ended quarter. 

The consolidated revenue from operations for the Q2 period came in at Rs 12,624 crore versus Rs 10,638 crore during the same quarter last year. Sequentially, the revenue grew 6.4 per cent from Rs 11,865 crore in the June-ended quarter.

Net profit at the company, however,  declined 9 per cent year-on-year (YoY) to Rs 623 crore as against Rs 686 crore in the same quarter of the previous fiscal year. 

The company’s operating profit during the Q2 period came in at Rs 1,005 crore, while it stood at Rs 892 crore during the corresponding period a year ago. Operating profit margin for the quarter was reported at 7.96 per cent, down from 8.4 per cent in Q2FY23.

During the first half of FY24, the company opened 12 stores, with a total count of stores currently at 336.

The group is primarily engaged in the retail trade through offline and online channels.

Ahead of its results announcement on Saturday, the scrip on Friday (October 13) ended around 2 per cent higher at Rs 3932.75 apiece on the BSE.

Should you buy, hold, or sell Avenue Supermarts shares after Q2?

Brokerages maintain a mixed view on the Avenue Supermarts stock after its Q2 earnings. Global brokerage Jefferies suggests a hold rating on the counter and has raised the target price from the earlier Rs 3700 to Rs 3850. The brokerage said the company’s Q2 EBITDA came in below estimates given the lower gross margin and higher staff costs. The company’s general merchandise and apparel mix segments reported muted growth during the Q2 period. On the store additions front, the brokerage opined that while it remained muted during the period, it should see a ramp-up going ahead.

Morgan Stanley has upgraded the stock to an overweight rating from the earlier equal-weight call. Further, the brokerage has increased the target price to Rs 4,471 from Rs 3,786.

Another global brokerage, JP Morgan, has an underweight rating on the counter with a target price of Rs 3200.

Both Citi and Goldman Sachs maintain a sell rating on the counter, with a new target price of Rs 3100 and Rs 3650, respectively. On the other hand, Macquarie maintains an outperform call on the stock and suggests a target price of Rs 4450, implying a potential upside of over 13 per cent.