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Avenue Supermarts Share Price: On Monday, January 13, shares of Avenue Supermarts fell by 5.7%; Should investors buy, sell or hold?
DMart shares
Avenue Supermarts, backed by ace investor Radhakishan Damani and the operator of the DMart retail chain, reported its Q3 results over the weekend. On Monday, January 13, shares of Avenue Supermarts fell by 5.7%, reaching Rs 3,474 on the BSE as investors expressed disappointment over the company’s performance.
For Q3FY25, DMart posted a 17.5% year-on-year (YoY) growth in standalone revenue, reaching Rs 15,565 crore. Profit rose 6.5% YoY to Rs 785 crore. However, the retailer’s EBITDA margin dropped to 7.9% in Q3FY25, compared to 8.5% in the same period last year. Similarly, the PAT margin decreased to 5% from 5.5% YoY. Analysts suggested that DMart’s margins are likely to remain under pressure due to heightened competition and the company’s focus on gaining market share over improving margins.
During the quarter, same-store sales growth (SSSG) for stores open for two years or more was 8.3%. Avenue Supermarts’ Managing Director and CEO, Neville Noronha, noted that while discounting in the FMCG category remained intense, the impact on high-turnover stores in metro towns was lower than in the previous quarter (Q2 FY25).
For the first nine months of FY25, DMart recorded a 21.5% growth. The company also highlighted a surge in demand for home delivery services, which has now surpassed the sales contribution from pick-up points. Noronha emphasized that the company would continue to offer both home delivery and pick-up point options, with home delivery becoming the primary channel in several towns.
Analysts’ Views
Following the Q3 results, Jefferies India Pvt Ltd noted that while DMart saw an acceleration in same-store sales growth, EBITDA margins fell below expectations due to a shift toward higher food sales, which led to a lower gross margin. The higher staff and operating expenses further impacted profitability, with EBITDA growing 10% YoY and net earnings increasing by 6%. However, both figures missed Jefferies’ and consensus estimates.
Jefferies analysts have reduced their FY25-27 EPS estimates by 3-6% and maintained a HOLD rating with a revised target price of Rs 4,225.
Motilal Oswal Financial Services (MOFSL) also downgraded its FY25-27 EBITDA estimates by 4% due to rising costs and intensified competition from Quick Commerce (QC). MOFSL has cut its FY25-27 EPS estimates by 4-7% and reiterated a Buy rating with a revised target of Rs 4,450 (down from Rs 4,750).
Management Changes
DMart also announced the appointment of Anshul Asawa as CEO Designate and Senior Managerial Personnel, effective March 15, 2025. Ignatius Navil Noronha, who is currently serving as Managing Director, will complete his term on January 31, 2026. Asawa will succeed him as MD and CEO, subject to shareholder and regulatory approvals.
Following the management announcement, Jefferies analysts commented that while they do not anticipate significant changes, they hope for a decisive increase in store additions, a comprehensive strategy to tackle rising competition, and improved disclosures under the new CEO.
