Shares of DMart parent Avenue Supermarts slipped 4% on Monday after the brick-and-mortar retailer's EBITDA margin declined to 7.3% in the January-March quarter compared to 8.4% in Q4 FY22.
The stock opened at ₹3,550.00 and hit an intraday low of ₹3,506.60 on the National Stock Exchange (NSE). At the close of market hours, shares of DMart were trading 4.2% down at ₹3,523 apiece on the NSE.
The Radhakishan Damani-owned retailer's net profit rose by 8% year-on-year to ₹460.1 crore for the quarter ended March compared with ₹427 crore in the corresponding quarter last year.
The company's revenue from operations increased 20.6% to ₹10,594 crore in Q4 from ₹8,786 crore in the same period last year.
Earnings before interest, tax, depreciation and amortisation (EBITDA) in Q4 FY23 stood at ₹772 crore as against ₹739 crore in the corresponding quarter of last year.
Homegrown brokerage ICICI Securities has slashed its target price on the stock from ₹3,900 to ₹3,800 while maintaining a 'HOLD' rating.
Key downside risks are slower turnaround of e-commerce operations and higher-than-expected competitive intensity, the brokerage says in a note.
DMart's Q4 revenue performance has been decent, however, same-store revenue performance in the second half of FY23 at 11% is underwhelming, according to ICICI Securities.
"This was largely impacted by continued underperformance in General Merchandise and Apparel which also negatively impacted the margin mix. Per our channel checks, in apparel segment, DMART is facing strong competition from specialist retailers like Zudio, Max etc," the brokerage says, adding that DMart's outperformance in food and non-food is 'comforting'.
Even as the new stores opened continue to ramp up well, revenue per square feet remains around 9% below pre-Covid levels (vs Q4 FY19), notes ICICI Securities.
DMart added 18 stores in the quarter and 40 in FY23, taking its total store count to 324.
"Geographical expansion in brick and mortar business has been conservative given ~58% store addition was concentrated in top-3 states only (vs 42% during FY18-22) while in e-commerce business it has been aggressive: ventured into 22 cites (vs 11 cities in FY22),” the brokerage says. “We expect DMART to add 45 stores p.a. during FY24-25E implying retail expansion rate at 16-18%," it adds.
Profitability remained subdued due to weak mix and retail expansion during the quarter (added 18 stores in 4Q compared to 40 stores in FY23).
Another domestic brokerage, Nuvama Institutional Equities, also revised its target price for Avenue Supermarts to ₹3,913 from ₹4,193 earlier.
For the full financial year 2022-23, DMart parent's total revenue stood at ₹42,840 crore as compared to ₹30,976 crore in the same period last year. EBITDA in FY23 stood at ₹3,637 crore as compared to ₹2,499 crore during FY22. EBITDA margin stood at 8.5% in FY23 as compared to 8.1% in FY22. Net Profit stood at ₹2,378 crore for FY23 as against ₹1,492 crore in FY22.
