DMart stock performance

DMart Share Price Gains More Than 4% After Avenue Supermarts Post In Line Q1 Results

In the ever-volatile world of the stock market, quarterly results can often act as a catalyst for significant movements in share prices. Recently, Avenue Supermarts Ltd, commonly known as DMart, experienced such a movement. The company’s Q1 results for the April-June quarter have led to a notable uptick in its share price, garnering the attention of investors and analysts alike.

Q1 Results Overview

DMart, a prominent player in the hypermarket sector, announced its financial results for the first quarter over the weekend. The results highlighted a strong performance, with several key figures standing out. The consolidated net profit for Q1 rose by an impressive 17.5%, reaching ₹773.8 crore compared to ₹658.8 crore in the same period last year. Additionally, operating revenue saw an 18.6% increase, amounting to ₹14,069 crore, up from ₹11,865.4 crore in the previous year.

Stock Market Reaction

The stock market reacted positively to these encouraging figures. On Monday, DMart‘s share price opened at ₹5,126.45, which was approximately 3.69% higher than the previous close of ₹4,943.65. Throughout the day, the share price gained further, peaking at ₹5,164 on the NSE, marking a 4.4% increase.

Revenue Growth

The significant growth in operating revenue was a standout aspect of DMart’s Q1 performance. This 18.6% rise was driven by various factors, including an increase in store numbers and robust same-store sales growth (SSG). The company’s strategic expansion and efficient operations played a crucial role in this revenue surge.

Net Profit Surge

Equally impressive was the rise in consolidated net profit. The 17.5% year-on-year increase to ₹773.8 crore demonstrated DMart’s ability to maintain profitability despite the challenging market conditions. This growth in net profit is a testament to the company’s effective cost management and strong sales performance.

Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA)

DMart’s standalone EBITDA grew by 18% year-on-year, reaching ₹1,220 crore. Analysts noted that this figure was in line with consensus estimates, reflecting the company’s steady operational efficiency. Jefferies India Pvt Ltd, in their post-result report, emphasized that the EBITDA growth aligned with their expectations, underscoring DMart’s consistent financial health.

Store Additions and Same Store Sales (SSG)

A significant contributor to DMart’s revenue growth was the addition of new stores and the performance of existing ones. The company managed to achieve low-double-digit SSG, which indicates healthy sales growth in stores that have been open for at least a year. This combination of expanding the store network and maintaining strong performance in existing stores has bolstered DMart’s overall revenue.

Analysts’ Insights

Analysts at Jefferies India Pvt Ltd provided a detailed analysis of DMart’s Q1 performance. They highlighted that the company’s revenue growth was healthy, supported by store additions and SSG. However, they also pointed out that the current valuation, at 90 times the one-year forward price-to-earnings ratio, is quite steep compared to peers. Despite this, they believe that the worst is behind DMart in terms of store additions and mix.

Target Price and Recommendations

Given the strong Q1 performance and future potential, analysts have slightly adjusted their FY25-27 earnings estimates for DMart. Jefferies India Pvt Ltd has maintained a ‘Hold’ rating on the stock with a slightly higher target price of ₹4,600. This recommendation reflects their cautious optimism about DMart’s future growth prospects.

Market Sentiment and Future Outlook

The general market sentiment towards DMart remains positive. Investors are encouraged by the company’s solid financial performance and strategic growth initiatives. Looking ahead, DMart’s ability to sustain revenue growth, manage costs effectively, and expand its store network will be key factors influencing its stock performance.

Conclusion

In conclusion, DMart’s Q1 results have reinforced its position as a leading player in the hypermarket sector. The significant gains in revenue, net profit, and EBITDA highlight the company’s robust operational strategies and financial health. While the stock is currently trading at a premium valuation, analysts remain cautiously optimistic about its future prospects. Investors will be closely watching DMart’s performance in the coming quarters to gauge its long-term growth potential.

FAQs

What contributed to DMart’s revenue growth in Q1?

DMart’s revenue growth in Q1 was primarily driven by the addition of new stores and strong same-store sales growth (SSG).

How did the stock market react to DMart’s Q1 results?

The stock market reacted positively, with DMart’s share price opening 3.69% higher and gaining further throughout the day.

What are the analysts’ views on DMart’s future performance?

Analysts believe that DMart has a solid growth potential but note that the current valuation is steep. They have adjusted their future earnings estimates slightly upward.