The recent Q2FY25 update from Avenue Supermarts, the parent company of DMart, has sparked mixed reactions among brokerages. While some remain optimistic, others express concerns about the company’s growth trajectory. For those looking to buy shares online, understanding the market sentiment surrounding Avenue Supermarts is crucial.
Avenue Supermarts reported a 14% year-on-year increase in standalone revenues, reaching ₹14,050 crore for the quarter ending in September 2024. Despite this growth, several brokerages, including Morgan Stanley, raised concerns about the pace of revenue expansion. Investors contemplating whether to buy shares online may want to factor in the company’s slower-than-expected growth. Morgan Stanley maintained an ‘overweight’ rating with a target price of ₹5,769, citing that while revenue underperformed expectations, operational metrics did show improvement, albeit at a slower rate.
Brokerages have provided divided opinions on Avenue Supermarts’ stock. Macquarie, which has rated DMart as ‘outperform,’ set a target price of ₹5,600. Despite the slower sales growth compared to Q1 and slightly underwhelming store additions, Macquarie still remains optimistic. They do anticipate a sequential drop in gross margins, which they attribute to changes in product mix.
On the other hand, investors looking to buy shares online may find Goldman Sachs’ outlook less favourable. The firm retained a ‘sell’ rating with a target price of ₹4,050, highlighting that DMart’s growth slowdown could be tied to the increasing competition from quick commerce (Q-Commerce).
Goldman Sachs further reduced its FY26 and FY27 EPS estimates by 2%, attributing this to a deceleration in Same Store Sales Growth (SSSG). As of September 2024, DMart operated 377 stores, adding six new locations during Q2. However, Goldman Sachs flagged risks in the company’s expansion strategy. Those looking to buy shares online should consider these concerns, as the brokerage believes that store expansions may not align with the current market dynamics.
Citi echoed Goldman Sachs’ caution, maintaining a ‘sell’ rating with a lower target price of ₹3,350. The brokerage believes that Avenue Supermarts is facing challenges with its product mix and store throughput.
Although six stores were added in the last quarter, Citi remains sceptical about whether the company’s expansion plans can deliver the desired results in the long term. As the risks surrounding store additions persist, potential investors may need to carefully assess whether this is the right time to buy shares online in Avenue Supermarts.
DMart’s shares recently closed at ₹4,941 on the NSE, reflecting a marginal drop. Despite this, the stock has risen by 21% this year, outpacing Nifty’s return of 16%. Over the last 12 months, DMart’s stock has gained 27%, although it still lags behind Nifty’s 30% increase over the same period. For those keen to buy shares online, these performance metrics indicate a solid, though cautious, growth story.
Avenue Supermarts’ Q2 performance has left brokerages divided. While some see potential for long-term gains, others remain concerned about growth and expansion risks. As you consider whether to buy shares online in Avenue Supermarts, it’s essential to weigh both the positive and negative outlooks of major financial institutions.
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