Analysts bearish on DMart parent after co misses Q1 view

Mumbai: Most brokerages have maintained a bearish view on Avenue Supermarts as its June quarter earnings missed consensus estimates owing to a sharp decline in gross margins.

They see limited triggers for the stock in the near term and see a recovery in demand only after the September quarter. Some said valuation is expensive and limits the possibility of having a constructive view on the stock.

The owner of supermarket chain

reported a 132.3% jump in net profit from year ago level to Rs 115 crore but missed estimates.

UBS and Kotak Institutional Equities have maintained a sell rating. IIFL has maintained add rating with a target price of Rs 3,400 and Edelweiss has retained hold rating. Motilal Oswal has maintained a neutral stance. ICICI Securities and Axis Securities have maintained a reduce rating.

Morgan Stanley has downgraded the stock to equal-weight from overweight but revised target price higher to Rs 3,268 from Rs 3,218.

“…long-term bullish view on DMart remains intact…as we expect a full-fledged demand recovery only post the second quarter of FY22 and see limited triggers for near term stock performance, we move to the sidelines awaiting a better entry point,” said Morgan Stanley.

Motilal Oswal has maintained a neutral rating with a target price of Rs 3,220.

“Expensive valuations; risk of a moderation in growth, owing to strong traction for online retailers in a post-COVID world; and the presence of deep pocket players like Amazon and Reliance Retail restricts the near-term upside,” said Motilal Oswal.