DMart shares drop 4% as Q2 profit falls

Shares of Avenue Supermarts Ltd, the parent of brick-and-mortar retailer DMart, fell as much as 4% on Monday after the company reported a 9% year-on-year drop in its net profit for the September quarter.

The offline retailer's stock opened at ₹3,825.05 against its previous closing price of ₹3,935.85 apiece on the National Stock Exchange (NSE). Share of the retailer slipped 4% to hit a low of ₹3,772.75 in opening trade, taking the company's market capitalisation to ₹ 2.5 lakh crore.

The stock has declined 6% on a year-to-date basis and 7% over the past year.

Net profit of Avenue Supermarts fell 9% year-on-year to ₹623 crore for the second quarter of FY24, as compared to ₹686 crore in the corresponding quarter of last year. Profit margin stood at 4.9% in Q2 FY24 as compared to 6.4% in Q2 FY23.

On a standalone basis, net profit stood at ₹659 crore in the second quarter, as compared to ₹730 crore in the corresponding quarter of last year while profit margin stood at 5.3% in Q2 FY24 as compared to 7% in Q2 FY23.

Total consolidated revenue for the quarter ended September 30, 2023 stood at ₹12,624 crore, as compared to ₹10,638 crore in the same period last year. Earnings before interest, tax, depreciation and amortisation (EBITDA) in Q2 FY24 stood at ₹1,005 crore, as compared to ₹892 crore in the corresponding quarter of last year. EBITDA margin stood at 8% in the July-September quarter as compared to 8.4% in Q2 FY23.

Total revenue for the first half of FY24 stood at ₹24,490 crore, as compared to ₹20,676 crore in the same period last year. EBITDA in H1 FY24 stood at ₹2,040 crore, as compared to ₹1,900 crore during H1 FY23. EBITDA margin stood at 8.3% in H1 FY24 as compared to 9.2% in H1 FY23.

Net Profit stood at ₹1,282 crore for the first half of FY24 as against ₹1,329 crore in H1 FY23. PAT margin stood at 5.2% in H1 FY24 as compared to 6.4% in H1 FY23.

“Q2 FY 2024 saw revenue growth of 18.5% as compared to the corresponding quarter of last year. Our gross margins continue to be lower compared to the same period in the previous year due to lesser contribution from the higher margin General Merchandise and Apparel business. We opened 9 new stores during the quarter taking our total store count to 336,” says Neville Noronha, CEO and managing director, Avenue Supermarts.

Basic Earnings per share (EPS) for H1 FY24 stood at ₹19.72 as compared to ₹20.51 for H1 FY23.

Foreign brokerage Jefferies recommends holding the stock. The brokerage has raised the target price to ₹3,850 from ₹3,700. Foreign broking firm Citi remains cautious at current valuation given the risk around earnings.

DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.