dmart stock price: DMart Q1 a mixed bag; share price catches in the most positive: analysts

NEW DELHI: A slew of brokerages said June quarter results (DMart) were mixed. While they expect demand to pick up for DMart’s results after the first quarter — some of them even raised target prices — analysts largely believe recent healthy stock performance captures the most positives. The majority of price targets on the stock suggest either mid-single digit upside potential or downside potential. downgraded the stock to “hold”. He said while the June quarter’s margin performance was a surprise in an unfavorable sales mix, the weak overall recovery to 88% of the pre-Covid level, even after taking into account new store openings, was clearly a failure.

“Switching to T3FY24E (60 times EV/Ebitda) results in a target price of Rs 4,147, down from Rs 3,856 earlier). This implies 89 times FY24E PE (pre-Covid average of 74 times). valuation would be SSSG performance – at risk, if any, of online grocery – and DMart Ready scaling,” he said. The price target suggests simple potential for 5% increase.

Kotak Institutional Equities increased its FY2023 EPS estimates by 4% on higher store additions and better gross margins from improved mix. He also advanced his estimates and suggested a new target of Rs 3,530 from Rs 3,300 earlier. The soaring share price led the brokerage to downgrade DMart’s rating from “sell” to “reduce.” Kotak’s target suggests a potential drop of 11%.

The institutional share price target of Rs 2,700 for DMart actually suggests a downside potential of 32%.

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The certificate has climbed 12% in the last five sessions, thanks to the company’s trading update on the June quarter figures. said DMart’s June quarter margin delivery was near the highest level since its IPO in early 2017, and was achieved despite a sales mix that is still somewhat unfavorable by relative to the previous steady-state level.

But the growth in throughput per store has not been the most encouraging with a three-year CAGR of just 2%. This brokerage, however, estimated that a gross margin of almost 16% and an operating margin of more than 10% gives DMart the flexibility to refine its value propositions, i.e. to further reduce selling prices and embark on a higher growth path.

“If history is any kind of guide (CY2018), it’s very likely to happen and this may be the next big trigger for the stock. We remain optimistic; our optimism rests more on the growth track long offered by the company such that the stock can offer double-digit market capitalization over the next five years, even if the PE halves during this period,” he said.

This brokerage has a price target of Rs 4,330, suggesting a 9% upside.

Prabhudas Lilladher is bullish on DMart. It increased the FY23 EPS estimate by 6.3% and the FY24 EPS estimate by 6.5% and raised the target to 4,636 rupees from 4,340 rupees earlier following strong sales and earnings momentum.

The zero Covid impact led to a normal quarter, with the company monetizing 110 large stores opened in the past three years, he said.

System-wide average sales per store at Rs 34.70 crore were 8% higher than in the first quarter of FY2020, despite the aggressive addition of stores over the past six months. Discretionary non-FMCG also recovered helped by the back-to-school season, although it remained below pre-Covid levels, Prabhudas Lilladher said.

“Q1FY23 being the first quarter without covid downtime contributed to the robust performance of larger and better designed new stores with the ability to handle a larger scale of revenue. General merchandise and apparel saw better traction than ‘in the previous quarter, but still have some overhang from the disruption caused by Covid-19 and the acute inflationary impact. The composition of discretionary contributions has not yet reached pre-Covid levels,’ said the brokerage house.

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Karen J. Nelson