Avenue Supermarts Stock Gains After Analysts Raise Earnings Estimates Post Q3 Results
A shopper browses different varieties of rice while carrying a shopping bag from D-Mart, a supermarket operated by Avenue Supermarts Ltd. (Photographer: Dhiraj Singh/Bloomberg)

Avenue Supermarts Stock Gains After Analysts Raise Earnings Estimates Post Q3 Results

Analysts raised their earnings estimates for Avenue Supermarts Ltd. as they expect the operator of DMart hypermarket chain to benefit from its focus on e-commerce and to account for better-than-estimated third-quarter results.

The company’s revenue rose 11% year-on-year to Rs 7,542 crore in the quarter ended December, according to its exchange filing. Its net and operating profit, too, increased and margin expanded over the corresponding quarter last year.

During the quarter, Avenue Supermarts soft-launched its online shopping option — DMart Ready— in select pin codes of Ahmedabad, Bengaluru and Hyderabad. The company will continue with small trials, reviews and controlled acceleration of online shopping.

Shares of the company rose as much as 5.7% to Rs 3,137 apiece on Monday to hit an all-time high but pared most of the gains to trade 0.6% higher.

Here’s what brokerages have to say about Avenue Supermarts’ third-quarter results…

Jefferies

  • Rates ‘hold’ post the 50% stock rally in 2020 that pushed its valuation to about 100x FY22 P/E.

  • Target price is at Rs 3,200 apiece based on 75x FY23 estimated earnings.

  • Beyond the restricted hours in some places, DMart continues to face inconsistent supplies in the non-FMCG sector.

  • Input prices have also been rising. The company expects this may have an impact on revenue and margin in the near term.

Raises FY22-23 earnings forecasts by 2-4%, saying it continued to like DMart given strong growth opportunity.

Morgan Stanley

  • Raises FY21, FY22 and FY23 earnings estimates by 2%, 7% and 8%, respectively, to account for better revenue growth and margin as evidenced by Q3 FY21 results.

  • Raises scenario values 24-30% to reflect near-term earnings changes and increased long-term revenue forecasts due to faster e-commerce scaling.

Morgan Stanley's revised price target is Rs 3,275 apiece against Rs 2,600 earlier, implying about 10% upside.

Edelweiss

  • DMart got back on growth track in Q3 FY21 with 9% growth (14% above estimate).

  • The aggression on e-commerce, along with potential market share gains in modern trade channel, bodes well for long-term growth sustenance, and thus it raised target multiple to 60x EV/Ebitda and target price to Rs 2,864 apiece.

  • Maintains ‘hold’ but continued aggression and overall performance will drive further re-rating.

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