Analysts retain DMart price targets yet see limited upside

Mumbai: Analysts at brokerage firms marginally raised or retained their price targets for Avenue Supermarts, the parent of supermarket chain DMart, on Monday despite the company's second-quarter results falling below estimates. The stock fell 1.80% to ₹3,865 on Monday.

Analysts said stock upsides from current levels could be capped as it has already priced in a strong structural story. "Valuations have come off from the peak, but remain expensive," said Jefferies in a note to clients after the second quarter results. The average price target on Avenue Supermarts based on analyst estimates compiled by Bloomberg after the second quarter results is at ₹4,004.26, implying an upside of 3.6% over Monday's closing.

The company's consolidated net profit in the September quarter fell by 9% to ₹623.35 crore from the year-ago period. Revenue grew by 18.5% to ₹12,307.72 crore in this period.


Analysts attributed the fall in profits to a lower share of general merchandise and apparel (GMA) business and increased employee costs. But it is likely to improve due to increased spending in the festive season, they said. ET looks at what some top analysts are saying about DMart's prospects.

Jefferies

• S Increase in-store additions and improvement in GMA must for stock performance.
• Store additions remained muted but should see a ramp-up.

Morgan Stanley

• Valuations have corrected to 78 times the estimated P/E, a 13-14% discount to its own historical average.
• Lack of improvement in profitability is a concern; DMart pursuing a grocery-first strategy to re-engineer growth.