The stock price of Dmart plummeted over 8 per cent in the Monday trading session after the Supermarkets' September quarter earnings were below expectations due to rising costs and slower-than-expected growth in revenue and net profit.
Dmart stock traded at Rs 4,189 with 8.37 per cent loss in the morning session on the National Stock Exchange (NSE).
Avenue Supermarts registered a little increase of 5.77 per cent from Rs 623.56 crore in the same quarter of last year to a consolidated net profit of Rs 659.58 crore in the second quarter of FY25.
In Q2FY25, the retail revenue increased 14.4 per cent year-on-year (YoY) to Rs 14,444.5 crore from Rs 12,624.4 crore. Operationally, EBITDA in Q2FY25 was Rs 1,094 crore, down from Rs 1,005 crore in the same period the previous year. YoY, EBITDA margin shrank to 7.6 per cent from 8.0 per cent.
Notably, for stores two years and older, the like-for-like revenue growth in Q2FY25 was only 5.5 per cent.
A number of brokerages lowered their target prices and downgraded their recommendations for Dmart shares as a result of its Q2 results, which fell short of forecasts.
JP Morgan reduced its FY25 and FY26E EBITDA projections by 8 per cent and 10 per cent, respectively. Avenue Supermarts' stock was downgraded to Neutral, and the target price was lowered from Rs 5,400 to Rs 4,700.
Another brokerage firm, Bernstein claimed that the Avenue Supermarts Q2 revenue growth was the lowest in four years and the lowest in three years for LFL growth.
Given the influence of online grocery companies and the deterioration in Dmart's first half (H1) FY25 performance, Nuvama Institutional Equities reduced its projections for FY25E revenue, EBITDA, and profit after tax (PAT) by 3 per cent, 4 per cent, and 7 per cent , respectively.
Further the brokerage firm kept its ‘hold’ recommendation and lowered its target price for DMart shares from Rs 5,183 to Rs 5,040.
According to Antique Stock Broking, the company's revenue performance was negatively impacted by the growing competition from rapid commerce and online grocery stores in major cities. Gross margin increased (by 21 basis points YoY) as a result of a little recovery in general merchandise and clothes. However, the EBITDA margin shrank (by 27 basis points YoY) as a result of increased overhead brought on by better servicing levels.
“Our EBITDA expectations were reduced by 6 per cent to 10 per cent for FY25 to 27E after taking into account the competition from online grocery stores and the 2QFY25 performance,” stated Antique Broking.
The brokerage firm stated that DMart's capacity to combat competition from online grocery stores and recover in general items and clothes would be its main metrics to watch.
It also kept its ‘hold’ recommendation in place and lowered its previous Rs 5,098 call for the Dmart share price to Rs 5,026.
