Among them were Jefferies which reiterated a ‘Hold’ on the stock, citing concerns over the company’s general merchandise & apparel mix business which drove margin pressure. Kotak Institutional Equities, though raised its price target, recommended a ‘Sell’ on the stock.
Meanwhile, both Nuvama and Motilal Oswal cut FY24 profit after tax (PAT) estimates even as they maintained a buy rating on the counter.
Avenue Supermarts on Saturday reported a consolidated net profit of Rs 623.35 crore for the quarter ended September 30, 2023, which was down by over 9% from Rs 685.71 crore reported by the company in the corresponding period of the previous financial year. The company which operates DMart reported a consolidated revenue from operations at Rs 12,624 crore which was up by 18.66% from Rs 10,638.33 reported by the company in Q2FY23.
Here is what brokerages recommended on the stock:
Jefferies: Hold | Target: Rs 3,850
Jefferies maintains a hold on Avenue Supermart for a price target of Rs 3,850 which is up from an earlier target of Rs 3,700. Q2 EBITDA was below estimates on lower gross margins and higher staff costs. The general merchandise & apparel mix remained muted which drove margin pressure. The concerns continue if mix deterioration is cyclical or structural, Jefferies noted. The H1 same store sales growth (SSSG) at 8.6% is respectable, with improving footfalls, evident from higher per store transactions.
Kotak Institutional Equities: Sell | Target: 3,600
Kotak Equities has retained a Sell view on the Avenue Supermart shares even as it modestly tweaked its estimates and arrived at a fair value of Rs 3,600 which was up from Rs 3,475 earlier. DMart’s 2QFY24 revenue growth of 18.7% YoY was led by retail area addition of 12.1% YoY and improvement in core SSSG. GM print of 14.7%, 45 bps lower YoY, remained impacted by weaker GM&A mix (23% in 1HFY24 versus 24.8% in 1HFY23). However, the print was better-than-expected although offset by higher-than-expected other expenses,” Kotak said in a brokerage note.EBITDA missed estimates by a modest 2% while store addition of 12 in 1HFY24 was tepid and drove a reduction in FY2024 addition to 45, the brokerage said.
Nuvama: Buy | Target: Rs 4,021
Brokerage Nuvama retained a hold stance on Avenue Supermarts while recommending a target of Rs 4,021. It said that there was a positive spurt in productivity in the September quarter as the revenue per square feet jumped 6% YoY despite the company missing again on EBITDA, which was up only 12% YoY and below Nuvama’s estimates. The general merchandise & apparel (GM&A) share stayed below pre-Covid and was even down YoY, which was a surprise, the brokerage said.
Also, store addition, while bunchy, has a steep catch-up in H2FY24 in Nuvama’s view.
Motilal Oswal: Buy | Target: Rs 4,500
Motilal Oswal has cut its FY24E PAT by 4.6% on slower recovery in 1HFY24E but expects gradual improvement from 2HFY24E factoring in a revenue/PAT CAGR of 25%/26% over FY23-25 aided by 16%/8% growth in footprints/revenue productivity. It has assigned a 42X EV/EBITDA multiple on a September FY25E basis to arrive at the target of Rs 4,500 as it reiterated a Buy rating on the stock.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)