Avenue Supermarts shares jump 4%. Should you buy, sell, or hold after Q1 results?
Avenue Supermarts' shares surged 4% to Rs 5,166 on BSE as Q1 revenue rose 19% YoY, driven by 14% area expansion and 4% productivity growth. Analysts highlight narrowing gaps in revenue per sq ft (up 4.2% YoY) and per store (up 4.7% YoY), signaling higher share from larger stores.
Shares of , which runs the hypermarket chain , on Monday rallied over 4% to day's high at Rs 5,166 on BSE after its consolidated revenue grew 19% YoY in Q1, led by 14% area addition and 4% productivity growth."An increased contribution from GM&A resulted in a 40bp improvement in gross margin (GM). Higher cost of retailing (COR) led by store adds and operating costs for improving servicing offset the GM improvement and resulted in flat EBITDAM. As a result, EBITDA/PAT grew by 18% YoY each (5%/6% miss)," Motilal Oswal said.
Analysts noted that the gap between revenue/sq ft (up 4.2% YoY) and revenue/store (up 4.7% YoY) continued to shrink, indicating an improvement in the share of larger format stores.
"Going ahead, healthy cost efficiency and a recovery in discretionary demand should drive growth. We have broadly kept our estimates unchanged for FY25/FY26," Motilal said while giving a buy call with a target price of Rs 5,500.
Nuvama analysts noted that D-Mart sustained an improving trajectory of GM&A (general merchandise and apparel) contribution for the past three quarters, which is reflected in its improving gross margins quarter after quarter.
"Building in a slight improvement in-store productivity, we are tweaking up revenue for FY25E/26E by 1/3%. Rolling forward to Q1FY27E earnings and valuing the company at 75x PE, our revised target price works out to Rs 5,091," it said while giving a hold rating on the stock.
During the quarter, the retailer's consolidated profit jumped 17.5% to Rs 774 crore against Rs 659 crore in the corresponding quarter of the previous financial year while revenue jumped 18.6% year-on-year (YoY) to Rs 14,069 crore.
Contribution from General Merchandise and Apparel continued to improve during the quarter and this is reflected in the gross margin uptick (Q1 FY 2025 vs Q1 FY 2024). Operating costs have gone up due to continuing efforts on improving service levels and building capability for the future," said Avenue Supermarts CEO and MD Neville Noronha.
During the quarter DMart opened 6 new stores, taking the total store count to 371 as of June-end.
Source: Stocks-Markets-Economic Times
