Following Avenue Supermart’s second-quarter trading update, analysts at several brokerage firms have presented a divided outlook on the stock.
Global brokerage firm Morgan Stanley has an ‘Overweight’ rating on Avenue Supermart, with a price target of $5,769 per share.
The foreign brokerage noted that D-Mart’s standalone revenue for the second quarter fell short of expectations, although operating metrics showed improvement, albeit at a slower pace.
Morgan Stanley expressed disappointment with the growth trend and now expects greater clarity from management during its upcoming second quarter results regarding the slower growth rate.
Macquarie is rated ‘Outperform’ in DMartwith a target price of $5,600. Although sales growth has slowed compared to first-quarter levels, store expansion was also slightly below expectations. The brokerage anticipated a sequential moderation in gross margins due to changes in product mix.
Citi has issued a ‘Sell’ recommendation for the supermarket chain, with a price target of $
3,350 per share.
In its note, the brokerage highlighted that the company’s second quarter update showed year-over-year revenue growth of 14.2%, compared to the 19% estimate. Citi believes performance is still affected by an unfavorable product mix and new store additions, noting that D-Mart added six stores during the quarter.
The total number of stores as of September 30, 2024 was 377.
The brokerage remains cautious on the current valuation due to risks associated with store expansion and earnings.
Goldman Sachs also has a ‘Sell’ rating with a price target of $4,050. GS highlighted a sharp slowdown in growth, likely affected by the rise of Q-Commerce.
Avenue Supermarts recorded 14% year-on-year growth in standalone revenue for $14,050 crore for the quarter ended September 2024.
Promoted by Radhakishan Damani and his family, DMart sells household and personal essentials in markets including Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana, Chhattisgarh, NCR, Tamil Nadu, Punjab and Rajasthan.
Avenue Supermarts shares are currently trading 2.91% lower at 4,798.90 apiece. The stock is up 18% so far in 2024.
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