CLSA raises DMart target price, sees 14% upside, says report; stock gains

CLSA on DMart: Shares of DMart, owned and operated by Avenue Supermarts Ltd, rallied as much as 1.12 per cent to hit an intraday high of Rs 5,016 per share on Tuesday, August 27, 2024. 

The uptick in share price came after reports indicated that Hong Kong-based international brokerage CLSA has increased DMart’s target price. 

Analysts at CLSA have upped DMart’s target price to Rs 5,650 from Rs 5,535, and retained its ‘Outperform’ rating, according to reports.

“We remain positive on the stock outlook for DMart as the remaining long-term cost-leader in Indian retail. We lift our target price from Rs 5,535 to Rs 5,650 and retain our ‘Outperform’ rating," analysts at CLSA said.

 

The revised target price follows the analysis of DMart's FY24 annual report, which highlighted a stronger focus on sustainability. The retail chain operator DMart, analysts at CLSA believe, has been gradually improving across the environmental and social metrics.

DMart has also ramped up its use of solar energy and achieved more green building certifications for its stores, resulting in reduced power expenses.

On the social front, the company is increasing its hiring of permanent female employees while maintaining a high proportion of female contract workers. Additionally, DMart is paying a greater percentage of its workforce above the minimum wage compared to FY23, according to CLSA analysts.

A Shot In The Arm

In the June quarter of financial year 2025 (Q1FY25), DMart’s consolidated total revenue jumped to Rs 14,069 crore, as compared to Rs 11,865 crore in the same period last year (Q1FY24).

The company’s bottom line or net profit came in at Rs 774 crore for Q1FY25, as compared to Rs 659 crore in the corresponding quarter of last year. PAT margin, meanwhile, stood at 5.5 per cent in Q1FY25, same as Q1FY24. 

Earnings before interest, tax, depreciation and amortisation (Ebitda) in Q1FY25 was Rs 1,221 crore, as opposed to Rs 1,035 crore in the corresponding quarter of last year. Consequently, Ebitda margin came in at 8.7 per cent during the same period. 

In Q1FY25, basic earnings per share (EPS) was Rs 11.89, as compared to Rs 10.14 in Q1FY24.

On June quarter results, Neville Noronha, CEO & managing director of Avenue Supermarts Limited said, “Our revenue for Q1FY25 grew by 18.4 per cent. Contribution from General Merchandise and Apparel continued to improve during the quarter and this is reflected in the gross margin uptick (Q1FY 2025 vs Q1FY 2024). We opened 6 new stores during the quarter. Our total stores stand at 371 as on June 30, 2024.”

Avenue Supermarts Limited, headquartered in Mumbai, operates the D-Mart chain, a supermarket brand. D-Mart provides a comprehensive range of home and personal products under one roof. The company’s offerings span several categories, including Foods, Non-Foods (FMCG), and General Merchandise & Apparel. 

Customers can find a diverse selection of products, such as groceries, dairy, frozen items, fruits and vegetables, home and personal care goods, bedding, crockery, footwear, toys and games, kids' apparel, and clothing for men and women.

The first D-Mart store opened in Mumbai in 2002. By June 30, 2024, the company had expanded to 371 stores, encompassing a total retail space of 15.40 million square feet. These stores are spread across various states and regions, including Maharashtra, Gujarat, Telangana, Andhra Pradesh, Karnataka, Tamil Nadu, Madhya Pradesh, Rajasthan, Punjab, NCR, Chhattisgarh, and Daman.

Stock Performance

The stock has shown robust performance on the exchanges this year, with a year-to-date increase of nearly 22 per cent, as against 13.04 per cent gain in BSE Sensex. Over the past six months, it has risen 27 per cent, and in the last three months alone, it has surged about 8 per cent, Bombay Stock Exchange (BSE) data showed.

The 52-week high of the stock is Rs 5,220 per share while its 52-week low is Rs 3,531 apiece. The market capitalisation of DMart is Rs 3,24,969.59 crore, according to BSE.

At 9:18 AM, DMart shares were trading 0.70 per cent higher at Rs 4,994.90 per share. In comparison, BSE Sensex was trading 0.04 per cent higher at 81,669.17 levels.