Avenue Supermarts, operator of retail chain D-Mart, reported a healthy set of earnings for Q4FY24, growing on three key parameters — profit, revenue, and profitability. The scrip surged over 2 per cent in the morning deals on Monday (May 6) after the company reported its Q4FY24 numbers on Saturday.
Avenue Supermarts Q4 Results
Avenue Supermarts reported a 22.39 per cent rise in consolidated net profit at Rs 563 crore for the fourth quarter ended March 2024.
The company had posted a consolidated net profit of Rs 460 crore in the corresponding quarter of the previous fiscal, Avenue Supermarts said in a regulatory filing.
Its consolidated total revenue for the quarter stood at Rs 12,727 crore compared to Rs 10,594 crore a year ago, it added. For the fiscal ended March 2024, the company said its consolidated net profit stood at Rs 2,536 crore against Rs 2,378 crore in FY23.
The company’s consolidated total revenue for FY24 was Rs 50,789 crore compared to Rs 42,840 crore in FY23. Avenue Supermart CEO & Managing Director Neville Noronha said DMart, the brick-and-mortar business, ended the year with growth across key financial parameters of revenue, EBITDA and PAT.
What Should Investors Do Now?
Buoyed by this, brokerages signaled a positive outlook for the D-Mart operator, forecasting a promising growth trajectory hereon.
In addition, the management also hinted at an increasing share of GM&A into its mix, which, according to Nuvama Institutional Equities, is a major positive.
JPMorgan also saw this improvement in a positive light, as it believes that the underperformance from the apparel segment is now behind. The foreign brokerage also sees a favourable risk-reward ratio for Avenue Supermarts, with a view that the business is set up well for acceleration.
Confident of the D-Mart operator’s future growth trajectory, JPMorgan upgraded the stock to an ‘overweight’ call while raising its price target to Rs 5,400.
The brokerage premised its upgrade on the confidence that D-Mart will likely deliver revenue growth in the high teens over the medium term. The company’s ability to ensure offerings at the lowest prices is another big positive, giving it a key competitive advantage over peers, JPMorgan highlighted.
Like JPMorgan, Nuvama also remains impressed by the addition of 24 new D-Mart stores in Q4FY24 which takes the total tally to 365 . This, according to Nuvama, breaks the slow store addition trajectory visible in the first three quarters of FY24.
Going ahead, the brokerage pegs an addition of 85 more stores by FY26, which, along with a pickup in the share of GM&A in the mix, is expected to aid the company’s margins.
“Factoring in this robust addition and runway for similar addition in coming years, we increase the earnings multiple to the pre-COVID average of 75x PE (earlier 70x),” Nuvama stated in its note.
The brokerage also raised its price target for the stock by around 18 percent to Rs 4,821, but retained its ‘hold’ call, largely due to the sharp run-up in the scrip in recent months.
On the other hand, it is the recovery in Avenue Supermarts’ revenue/sq ft and the reducing gap between revenue/store and revenue/sq ft that impressed Motilal Oswal Financial Services the most. According to the brokerage, this implied that the share of large-format stores improved,
which is a positive factor.
“This, along with the moderating inflation and the onset of the festive season, may help revive discretionary demand and consequently improve the SSSG (Same Store Sales Growth) trend,” MOFSL stated.
Maintaining a positive outlook, MOFSL also held to its ‘buy’ rating for the stock with a price target of Rs 5,310.
Marking a contrast from the consensus, Goldman Sachs sees store addition for Avenue Supermarts to be similar to that in the previous fiscal, with the focus largely on existing states.
The brokerage continued to keep a ‘sell’ call on the stock with a bearish price target of Rs 3,900. However, it did note that Q4 profit growth for Avenue Supermarts finally matched revenue growth.
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