Radhakishan Damani’s DMart stock jumps 4% on six-fold rise in Q1 profit; should you buy, sell, hold?

Radhakishan Damani’s Avenue Supermarts (DMart) share price jumped nearly 4 per cent to Rs 4,091.90 apiece on Monday, after the company reported nearly six-fold rise in Q1 profit. Avenue Supermarts posted a 490.30 per cent year-on-year rise in standalone net profit at Rs 680 crore for the June quarter compared with Rs 115 crore in the same quarter last year. Analysts say despite Avenue Supermarts best quarterly results ever where all Street estimates in terms of revenue, profit were beaten, the strong results have already been factored in the recent up trend. Analysts have mixed views on the stock after the company released its Q1FY23 earnings.

Edelweiss Research said that DMart reported standalone revenue growth of 95 per cent on-year. This was driven by close-to-nil covid-related disruption, back-to-school/college season and the onset of monsoon. Management highlighted QoQ improvement in traction in general merchandise & apparel (GM&A); however there is still some overhang of covid and inflation, and the traction still lags pre-covid, it said. The research firm has downgraded it to ‘hold’ on limited upside potential.

Motilal Oswal Financial Services has given ‘neutral’ rating to the stock with downside of 11 per cent at Rs 3,500 apiece. It noted that DMART’s strong growth footprint and cost optimization led to a healthy EBITDA/PAT CAGR of 19%/26%. But revenue per square feet remains under pressure due to the impact of inflation on the discretionary category and higher store sizes.

Prabhudas Lilladher has given ‘buy’ rating to the stock, as “it currently trades at 110x/85x our FY23E/FY24E earnings,” it said. The research firm noted that in spite of inflationary pressures, DMart witnessed positive volume growth in addition to value growth of discretionary products in relatively older stores. 

Pavitraa Shetty, Co-founder & Trainer, Tips2Trades, told FinancialExpress.com that technically, levels close to 3580-3600 will be great for a buy from a medium to long term perspective. A daily close above resistance of  4100 should lead to 4500 in the coming weeks.

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