Shares of Avenue Supermarts Ltd, operator of DMart chain of supermarkets, jumped as much as 6.5% in intraday trade on Monday, after reporting double-digit revenue and profit growth in the first quarter ending June 2019.
At 2:26 pm, Avenue Supermarts shares were trading at Rs 1,427.25, up 5%, on BSE after hitting an intra-day high of Rs 1,448.
DMart’s consolidated profit grew 31.87% to Rs 323.09 crore in the June quarter, while revenue from operations rose 27% to Rs 5,814.6 crore compared with the year-ago period.
Operating income, or earnings before interest, tax, depreciation and amortisation (Ebitda), jumped 41% year-on-year to Rs 596.8 crore in the June quarter. Margins, however, contracted to 9.74% during the quarter compared with 10.81% in the year-ago quarter.
Global brokerage houses were mixed on the DMart stock after its Q1 earnings. Credit Suisse upgraded its rating on Avenue Supermarts to ‘neutral’ from ‘underperform’, while raised its stock price target to Rs 1,330 from Rs 1,175.
Credit Suisse said the DMart stock has underperformed in the past one year as concerns on margin dilution played out. However, the brokerage house sees company’s margin concerns abating and has therefore lifted FY20/FY21 earnings estimates by 2-4%.
Meanwhile, Morgan Stanley remained ‘underweight’ on Avenue Supermarts with a target price of Rs 1,120. The brokerage house said changing retail landscape will have implications on DMart’s revenue growth and margins, adding that increased price competition may blunt the company’s first-mover advantage.
Morgan Stanley said sustainability of margin expansion trend would be key in determining the stock performance going ahead.
As of June 2019, DMart had 184 stores across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.
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