Synopsis: DMart shares surged over 4% following strong Q1 FY2024 results. Despite robust financial performance, high valuations and market uncertainties warrant a cautious investment approach. Analysts are divided, suggesting holding or moderate additions with specific target prices.
Stock Market Today
DMart share price surged more than 4% in early trades on Monday following Avenue Supermarts' Q1 results for FY2024. The stock opened at Rs.5,126.45, about 3.69% higher than the previous close of Rs.4,943.65, and reached an intraday high of Rs.5,164 on the NSE.
Q1 FY2024 Financial Performance
Avenue Supermarts Ltd (DMart) reported a 17.5% rise in consolidated net profit to Rs.773.8 crore for the April-June quarter, compared to Rs.658.8 crore in the same period last year. The company's operating revenue increased by 18.6% to Rs.14,069 crore from Rs.11,865.4 crore. The standalone EBITDA grew 18% year-on-year to Rs.1,220 crore, aligning with analysts' estimates.
Analysts' Insights
Jefferies India Pvt Ltd
- Opinion: EBITDA in line with estimates; healthy 18% YoY revenue growth.
- Concerns: Slightly soft same-store sales growth (SSG) due to larger store additions and reduced demand for discretionary goods.
- Recommendation: Maintain Hold with a target price of Rs.4,600.
Motilal Oswal Financial Services
- Opinion: Positive on EBITDA maintenance despite challenges; strong CAGR projections for revenue and net profit over FY24-26.
- Valuation: 52 times EV/EBITDA multiple, 83 times P/E on FY26 estimates.
- Recommendation: Target price of Rs.5,500.
Nuvama Institutional Equities
- Opinion: Improved gross margin; cautious on increased investments for future capability.
- Valuation: 75 times P/E.
- Recommendation: Maintain Hold with a target price of Rs.5,091.
Centrum Stock Broking
- Opinion: Steady operating performance; increased earnings estimates for FY25 and FY26.
- Recommendation: Retain ADD rating with a revised target price of Rs.5,428.
Investment Considerations
Positives:
- Strong Q1 results with significant profit and revenue growth.
- Maintenance of EBITDA amidst market challenges.
- Positive outlook for future growth and recovery.
Concerns:
- High valuation compared to peers (90 times one-year forward P/E).
- Soft same-store sales growth and reduced demand for discretionary items.
- Increased investments may impact short-term margins.
Conclusion
Given the mixed opinions from analysts, DMart's stock presents both opportunities and risks. While its Q1 results are encouraging, high valuations and market uncertainties suggest a cautious approach. Investors should weigh these factors and consider their risk tolerance before making any investment decisions.
Disclaimer
The views and recommendations above are those of individual analysts or broking companies and do not represent the views of Mint. We advise investors to consult certified experts before making any investment decisions.
