Shares of DMart parent Avenue Supermarts were tanking on Friday as the retailer’s second-quarter business update split brokerages on the company’s performance.

What Happened: Brokerages had a mixed outlook on DMart as the company reported a 14% year-on-year increase in Q2 standalone revenue, reaching ₹14,050 crore for the quarter ended September 2024. Despite this growth, some analysts expressed concerns about the pace of revenue gains.

Bullish Calls: Morgan Stanley maintained an “overweight” rating on Avenue Supermarts, setting a target price of ₹5,769. The brokerage noted that while Q2 revenue came in below expectations, operational metrics improved, albeit at a slower pace than anticipated.

Morgan Stanley indicated that it would look to management commentary for clarity on the reasons behind the slower growth in the upcoming Q2 results.

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Meanwhile, Macquarie kept its “outperform” rating with a target price of ₹5,600. The brokerage acknowledged a slowdown in sales growth compared to Q1 and noted that store additions had slightly missed expectations. Macquarie anticipates that gross margins will moderate sequentially due to shifts in the product mix.

Bearish Calls: Goldman Sachs, however, retained its “sell” rating on the stock, assigning a target price of ₹4,050. The firm pointed to a noticeable slowdown in growth, which it attributed to the rising influence of quick commerce. As a result, Goldman Sachs reduced its earnings per share estimates for FY26 and FY27 by 2%, citing weaker same-store sales growth.

As of September 30, DMart operated 377 stores across India, adding six new locations during the quarter. The company aims to open 45 stores in FY25, with a longer-term goal of 45-60 stores annually. However, Goldman Sachs flagged potential risks related to the expansion pace.

Citi also issued a “sell” rating with a target price of ₹3,350, noting that the store throughput may be impacted by an unfavourable product mix and the slower rate of new store additions. Citi remains cautious given the current valuation and risks associated with store expansions.

Price Action: DMart shares plunged 4.06% to ₹4,741.95 in early morning trade on Friday. The stock has gained around 16.66% so far this year.

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