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Nuvama Wealth raised Avenue Supermarts target price to Rs 4,580 from Rs 4,544
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Q2 revenue rose 15.5% to Rs 16,676.30 crore; net profit increased 4% to Rs 685.01 crore
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DMart added eight stores in Q2, total stores reached 432 with Rs 1,500 crore capital work
Nuvama Wealth Management raised the target price and maintained 'Hold' on Avenue Supermarts Ltd, backed by ace investor Radhakishan Damani, following second quarter results. The brokerage raised the target price to Rs 4,580 apiece from Rs 4,544 on Damani's portfolio stock. The current target price implied a 6% upside from Friday's close.
Nuvama Wealth Management also cut revenue estimates for financial years 2026 and 2027 by 0.8% and 1.7%, respectively, and profit estimates by 6.6% and 3.6%, respectively for Avenue Supermarts.
In the second quarter, DMart added eight stores, taking the total store count to 432. Its capital work in progress is at Rs 1,500 crore, the highest level, which implies potentially robust store additions over six months.
The widening loss in subsidiaries is stemming from a higher proportion of 'delivery sales' compared with pickup sales. DMart added 10 new fulfilment centres in its existing markets and continued to invest in strengthening its presence across major metro cities, Nuvama said in a report.
DMart Ready's implied growth of 16% year on year is notably lower than the previous 20% trend. Meanwhile, in the second quarter, Avenue Supermarts ceased operations in five cities, according to the brokerage.
Avenue Supermarts Q2 Highlights (Cons, YoY)
Revenue up 15.5% at Rs 16,676.30 crore versus Rs 14,444.50 crore.
Ebitda up 11.0% at Rs 1,213.65 crore versus Rs 1,093.72 crore.
Margin at 7.3% versus 7.6%.
Net Profit up 4% at Rs 685.01 crore versus Rs 659.58 crore.
In the July–September quarter, margin remained flat. The pace of margin contraction is the lowest in four quarters. Nuvama estimates that margin pressure will persist because of the sustained competition in the FMCG segment and product shifts.
Avenue Supermarts's operating expenditure increased due to a surge in wages of entry-level positions. A demand and supply mismatch of skilled workforce, service improvements, and future investments increased the wage.
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