Shares of Avenue Supermarts Ltd. fell after its second-quarter net profit missed estimates on the back of high inflation and lower footfalls.
The operator of the DMart chain of hypermarkets reported a 64% rise in net profit, partly aided by tax reversals of previous years, and 37% rise in sales in the September quarter. But that may not be enough to justify the stock’s current valuation, analysts said.
Most brokerages said that while FMCG and staples continued to perform well, the non-FMCG mix were still below pre-pandemic levels and remained a drag on margins. Valuations have come off from the peak post the recent correction but remain expensive, they said.
Analysts also see lower-than-expected store addition, cannibalisation, and shift in organised market to online with DMart’s slow transition as key risks to an otherwise strong business trajectory in a large addressable market.
Shares of Avenue Supermarts were trading 2.35% lower at 10:10 am as compared to 0.18% gain in the benchmark Nifty 50.
Of the 26 analysts tracking the company, 11 maintain a ‘buy’, six suggest a ‘hold’, and nine recommend ‘sell’, according to Bloomberg data. The 12-month consensus price target implies an upside of 1.9%.
Brokerages’ take on DMart’s latest quarterly results: