DMart share drops 5% despite a positive Q2 performance update

Financial performance of DMart: During Q2 of FY25, the company’s standalone revenue from operations was Rs 14,050.32 crore, up more than 14% from Rs 12,307.72 crore during the same period in FY24.

DMart reported Q2 FY23 revenues of Rs 10,384.66 crore, whereas Q2 FY22 revenues were Rs 7,649.64. There were 377 shops overall as of September 30, 2024.

In the June quarter of FY25 (Q1 FY25), DMart’s earnings increased 17.5% year over year (Y-o-Y) to Rs 773.7 crore, supported by growth in general goods and clothing sales. A year earlier in April through June, the firm reported a net profit of Rs 658.7 crore (Q1 FY24).
In the first quarter of FY25, the operator of a supermarket chain had a roughly 19% YoY increase in operating revenue, reaching Rs 14,069.1 crore. In comparison, Q1 FY24 saw Rs 11,865.4 crore.
The June quarter’s total costs increased 18.6% to Rs 13,056.61 crore. At the same time, overall revenue increased 18.5% year over year to Rs 14,110.74 crore.

What are the opinions of brokerages?
DMart has been rated as a “sell” by international stockbroker Citi, with a target price of Rs 3,350 a share.
The company said that the unfavorable product mix and the six new stores that debuted during the quarter are having a detrimental impact on throughput.Citi additionally expresses caution over the present value, pointing to earnings and store growth concerns.

Additionally, Goldman Sachs kept its “sell” recommendation intact, aiming for Rs 4,050.Goldman Sachs analysts saw a significant slowdown in growth, which they attributed to the emergence of rapid commerce (Q-commerce). Morgan Stanley, on the other hand, maintained a “overweight” rating on DMart, with a target price of Rs 5,769.

Although Q2 standalone sales did not meet expectations, it was noted that operational indicators improved, albeit more slowly.
Because of the growth trend’s unanticipated weakness, analysts will be looking to the management for further information during the next quarter’s results.
Macquarie, however, maintained the assessment of DMart as ‘outperforming’ and set a target price of Rs 5,600.

Background of DMart: The DMart brand of supermarkets, run by Avenue Supermarts, has an extensive selection of personal and household goods. Every DMart shop has a wide variety of goods, such as groceries, personal care products, cosmetics, apparel, kitchenware, bedding, and household appliances.

History of DMart’s share price: Over the last half-year, DMart’s stock price has increased by more than 1.5%. Nonetheless, the stock has increased by more than 16 percent so far this calendar year (YTD). The share price of DMart has a 52-week range of Rs 3,618.85-5,484. As per the BSE, DMart has a market capitalization of Rs 3.08 trillion. The business is included in the BSE 100 group.