Avenue Supermarts' stock rose more than 4% in early trading today after the company, which operates the retail chain DMart, announced a 17.5% increase in consolidated net profit for the June 2024 quarter. Net profit increased to Rs 773.8 crore in the first quarter of the fiscal year 2024-25, up from Rs 658.8 crore the previous year.
On the BSE, the stock rose 4.29% to Rs 5,166.10, up from Rs 4953.35 at the previous closing. The company's market capitalization rose to Rs 3.24 lakh crore. Revenue increased by 18.6 percent year on year to Rs 14,069.1 crore in Q1 compared to Rs 11,865.4 crore the previous year.
Earnings before interest, tax, depreciation, and amortization (EBITDA) in Q1 FY25 increased to Rs 1,221.3 crore from Rs 1,035.3 crore in the same period previous year. EBITDA margins increased 8.7% in Q1FY25 to Rs 13,712 crore from Rs 11,584 crore in Q1FY24. Standalone net profit increased 16.8 percent to Rs 812 crore in Q1FY25, compared to Rs 695 crore in the same period previous year.
Total revenue (Standalone) climbed 18.3 percent to Rs 13,712 crore in Q1 from Rs 11,584 crore in the same quarter previous year. Nuvama has raised its price goal to Rs 5,091 from Rs 4,821 before. The brokerage has maintained a 'HOLD' rating on the large capitalization stock.
"DMart's Q1FY25 gross margin increased due to an increase in contribution from General Merchandise & Apparel (GM&A), which is a plus, but this was offset by increased expenditures in enhancing service standards and creating capabilities for the future. Store productivity remained below the pre-Covid norm. The brokerage said that the addition of six locations this quarter was more than the same time previous year.
"Considering a gradual increase in store productivity, we are increasing FY25E/26E revenue by 1/3%. While presenting the FY27 forecasts, we are moving the target value to Q1FY27E profits at an intact 75x PE, resulting in a revised target price of Rs 5,091 (formerly Rs 4,821). "Maintain 'HOLD'," said the domestic brokerage.
Amnish Aggarwal, Director of Research at Prabhudas Lilladher, has issued an accumulate call to the stock with a price objective of INR 5,104.
"DMart results were consistent with our predictions, showing that operational parameters had stabilized, as sales/store increased by 4.7% and sales/ft increased by 4.4% YoY despite the introduction of larger-sized stores. Retail costs increased by 45 basis points year on year as operating costs rose due to investments in increasing service sales and creating capabilities for the future, resulting in an EBITDA margin miss of 17 basis points on our projections. D'Mart opened six new locations in 1Q25, with each store increasing in size by 50/20% year on year or quarter on quarter. We expect D'Mart to open 45 locations in FY25, with a continued focus on Tier-2/Tier-3 cities and the opportunity to accelerate store openings in the future years," added Aggarwal.
