Avenue Supermarts Shares Gain As Q3 Revenue Jumps

Shares of Avenue Supermarts Ltd. gained the most in more than three weeks after the operator of DMart supermarket chain reported its highest third-quarter revenue since 2018.

Standalone revenue rose 22% year-on-year to Rs 9,065 crore in the three months ended December, according to the company's quarterly business update filed with exchanges. It increased 18% over July-September.

Revenue grew at 16% annualised rate over two years, it said.

In Q3, Avenue Supermarts added 17 stores—its highest in seven quarters. The total number of stores as on Dec. 31 stood at 263.

Morgan Stanley, however, said the Radhakishan Damani-controlled company faces margin pressure due to operating costs in DMart Ready. Also, its failure to expand the online shopping and pick-up counter business in large cities could hurt incremental market share gains.

The research house maintained its ‘underweight' rating on the stock. “On average, revenue per sq ft was Rs 9,190 during the quarter, broadly similar to Rs 9,090 in Q3 FY21, but lower than Rs 10,025 and Rs 10,285 during the same quarter in FY20 and FY19, respectively,” Morgan Stanley said in a note.

Avenue Supermarts is set to announce its Q3 FY22 results on Jan. 8.

Shares of the company rose as much as 2.73% around 2:30 p.m. on Monday. Of the 28 analysts tracking the stock, seven maintain a ‘buy', eight suggest a ‘hold' and 13 recommend a ‘sell', according to Bloomberg data. The overall consensus 12-month price target implies a downside of 6.5%.