10 Jan , 2022 By : Kanchan Joshi
Avenue Supermarts Ltd, which owns and operates retail chain D-Mart, posted around 22% rise in its standalone net profit at Rs586 crore crore for the third quarter ended December 31, 2021. Shares of DMart were trading 0.6% lower at Rs4,700 apiece on the BSE in Monday's opening deals.
The Radhakishan Damani-promoted retail chain's revenue from operations surged to Rs9,065 crore, as compared to Rs7,433 crore in the same period last year.
DMart reported an inline Q3 with revenue growth at 22% YoY, with higher EBITDA growth at 26%, as per analysts at Jefferies. DMart witnessed the highest store addition ever for the third quarter, now operating 263 stores.
Jefferies maintains its Underperform rating on the stock with target price of Rs3,800 per share, given steep valuations and sharp re-rating seen in the last one year. “With Covid cases again rising, DMart could see some impact on its revenue and footfalls in the near term, dependent on the severity of local restrictions."
The company's gross margin dipped slightly on a yearly basis due to adverse mix although cost control measures helped and EBITDA (Earnings before Interest, Tax, Depreciation and Amortization) margins expanded marginally.
Those at Prabhudas Lilladher remain optimistic on D’Mart post Q3 results as they believe the company has reported strong growth despite higher inflation and lower mobility impacting sales of nonessentials like apparel and general merchandise. The brokerage retains Accumulate rating with target price of Rs5345 (Rs5364 earlier).
“Inflation & lesser opportunities to go negatively impacted demand for non-essentials, while essentials and FMCG continue to do better. This has led to deterioration in the sales mix. However, DMART is viewing this high inflationary environment as an opportunity to make its buying more efficient and sharpen its assortment thereby enabling it to sustain lower costs," the note stated.
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