DMart slumps to its lowest since July after weak Q3 show

Mumbai: Shares of Avenue Supermarts, operator of the supermarket chain DMart, declined as much as 6% on Monday to its lowest since July 2022 after third-quarter net profit and operational performance missed Street estimates, resulting in rating downgrades and price target cuts on the back of expensive valuations. Analysts cut price targets on the stock in the range of 1% to 18%.

On Monday, the stock closed at ₹3,678.65 on the BSE, down 4.75% from the previous close. The stock touched an intraday low of ₹3,627.

"Dmart has a formidable business model and the growth opportunity is also large, but it needs an aggressive growth strategy to justify the valuation level it commands," said HSBC in a note after the results. Nearly 19 lakh shares exchanged hands on BSE and NSE, over six times the average daily volume on both exchanges in the past month.

Credit Suisse warned of potential derating risks if the company's future growth remains muted as witnessed in the recently concluded quarter.

Kotak Institutional Equities also trimmed its target to ₹3,550 from ₹3,725. It said lowest cost-focused retailers typically tend to benefit in a high inflationary environment but "surprisingly this has not panned for DMart".

Of the 20 analysts that actively track the stock, eight of them have a 'sell' or 'underweight' or 'reduce' rating and another eight of them remain neutral. Four of them have a bullish or 'buy' rating. On aggregate, these analysts expect the stock price to hit ₹3,985.31, which translates into an 8% upside potential from the current levels, showed a Bloomberg poll of analysts.