The shares of Radakishan Damani led DMart has plunged 30.90% in the last six months and 12.67% in the last month. However, we saw that its share price increased by 8% on Monday’s opening deals, after the company reported healthy March quarter profits.
The company said that its FMCG business was recovering well. There was a boost in investor confidence, as far as the counter is concerned.
DMart reported a 3.14% year-on-year (YoY) increase in consolidated net profit at ₹ 427 crores, as compared to ₹ 414 crores in the same quarter last year. Its consolidated revenue rose 18.53% YoY to ₹ 8,786 crores in the March quarter compared to ₹ 7,412 crores in the corresponding quarter last year.
On a standalone basis, it reported a 17.8% increase in revenues, year-on-year. Its gross margin fell 5 basis points to 14.3%, however its EBITDA margin (earnings before interest, tax, depreciation and amortisation) rose 18 basis points to 8.6%, on the back of efficient cost control. One basis point is 0.01%.
The stock is trading at 3554.45 levels. It has declined as much as 39.76% from its 52-week high of ₹ 5900 apiece. In fact, the shares were enjoying high levels of share prices for a while. Now that the valuations are comparatively low, a few brokerages have suggested an upside on the stock.
ICICI Securities
“A broad-based market correction (and possibly some technical factors) does bring rationality to buy-at-any-price stories.” The report added, “In FY22-24E, we believe it has value and volume tailwinds: inflation (higher absolute gross profit per unit, operating leverage) and likely higher footfalls as more number of consumers prioritise value,” the brokerage said in a note.
ICICI Securities upgraded the stock from sell to ‘Buy’. It suggested a target of ₹ 3,900 apiece on the back of broad-based market correction and possibly some technical factors that indicated BAAP (Buy-At-Any-Price).
“Furthermore, we believe it will look to accelerate store expansion and the benefit of recent expansion is yet to fully kick in – revenue intensity is lower than pre-Covid levels. At 61 times FY24 P/E, we find valuations palatable,” the brokerage said.
Motilal Oswal
Motilal Oswal has recommended a ‘Neutral’ rating on the shares of Avenue Supermarts with a target price of ₹ 3500 in its research report dated May 15, 2022. It believes that though the stock has corrected more than 35% from its peak, its valuations remain expensive.
Yes Securities
The brokerage has suggested a ‘buy’ in this stock with a target price of ₹ 4165 in the stock amid a steep correction in the stock. This implies an upside of 16.05% as the stock is currently trading at ₹ 3589.00 levels.
JM Financial
JM Financial Institutional Securities Ltd has upgraded its rating on DMart from hold to ‘buy’, “after two years to take advantage of the recent steep price correction.”
“Average revenue per store for the March quarter has grown at just 2% CAGR versus March 2019 quarter’s undisturbed pre-pandemic level. DMart had compounded per-store revenue by 8.8% p.a. on an average (FY17-20) prior to the pandemic,” it added.
Edelweiss
Edelweiss has upped DMart’s rating from ‘Reduce’ to ‘Buy’ as the recent stock correction has brought its valuation in sync with the current business situation.
“Future valuation drivers would be SSSG performance – at risk, if any, from online grocery – and scale-up of DMart Ready. Our revised target works out to Rs 3,856 from Rs 3,966 earlier owing to a cut in the target EV/Ebitda to 60 times (from 65 times) factoring in margin uncertainty highlighted by management,” the brokerage said.
Kotak Institutional Equities
Kotak Institutional Equities has upgraded DMart’s rating from sell to ‘Reduce’ and has increased the target price from ₹ 3200 to ₹ 3300 apiece.
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