Avenue Supermarts shares fall 4% as Q2 profit drops. Should you buy, sell or hold?
Avenue Supermarts fell over 4% in the early trade on Monday to the day's low of Rs 3,772.75 after top brokerages highlighted sustained margin pressures in the company's operations while a couple of them cut their FY24 net profit estimates.
Among them were Jefferies which reiterated a 'Hold' on the stock, citing concerns over the company's general merchandise & apparel mix business which drove margin pressure. Kotak Institutional Equities, though raised its price target, recommended a 'Sell' on the stock.
Meanwhile, both Nuvama and Motilal Oswal cut FY24 profit after tax (PAT) estimates even as they maintained a buy rating on the counter.
Avenue Supermarts on Saturday reported a consolidated net profit of Rs 623.35 crore for the quarter ended September 30, 2023, which was down by over 9% from Rs 685.71 crore reported by the company in the corresponding period of the previous financial year. The company which operates DMart reported a consolidated revenue from operations at Rs 12,624 crore which was up by 18.66% from Rs 10,638.33 reported by the company in Q2FY23.
Here is what brokerages recommended on the stock:
Jefferies: Hold | Target: Rs 3,850
Jefferies maintains a hold on Avenue Supermart for a price target of Rs 3,850 which is up from an earlier target of Rs 3,700.
Q2 EBITDA was below estimates on lower gross margins and higher staff costs. The general merchandise & apparel mix remained muted which drove margin pressure.
The concerns continue if mix deterioration is cyclical or structural, Jefferies noted. The H1 same store sales growth (SSSG) at 8.6% is respectable, with improving footfalls, evident from higher per store transactions.
Kotak Institutional Equities: Sell | Target: 3,600
Kotak Equities has
