DMart Shares Gain After Q3 Print, But Analysts Are Cautious Around Growing Costs

Avenue Supermarts, the operator of the D-Mart hypermarket chain, witnessed strong share price gains on Monday following its parent company’s report of a 17% rise in net profit for the December quarter.

What Happened: The supermarket chain operator reported a consolidated net profit of ₹690.41 crore for the third quarter ended December.

Avenue Supermarts recorded a consolidated revenue of ₹13,572.47 crore, marking a 17.31% year-on-year increase. Its EBITDA came in at ₹1,120 crore against ₹965 earned in the previous year.

Analysts noted that the performance was largely in line with expectations amid gains from the festive season despite the inflationary impact. “Operating parameters also improved led by a strong festive season,” said domestic brokerage Prabhudas DLilladher.

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Pain Points: The company's EBITDA margin came in at 8.3%, which was below the average third-quarter EBITDA margin of 9% pre-COVID.

Avenue Supermarts highlighted that sales this year were lower than expected in the non-fast-moving-consumer-goods segment. However, Prabhudas Lilladher said the drag was temporary and should bounce back as inflation would ease over the next one or two quarters.

Employee costs/other opex both increased quarter-on-quarter as the company opened five new stores in Q3FY24, said Nuvama Institutional Equities.

On a sequential basis, this is lower than the nine stores opened in the quarter ended September. D-Mart has cut down the number of store openings to 40 and 45 for FY24 and FY25.

Nuvama adjusted its store addition guidance downward to 32 from 45 for the current fiscal. The brokerage also lowered its FY24/FY25 profit after tax estimates by 1%/3%.

Price Action: DMart shares were trading 0.55% higher at ₹3,862.10 in the afternoon session. Over the past six months, the Radhakishan Damani-led Avenue Supermarts stock has gained only 3.5%.

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