India's DMart slides after posting first profit drop in three years (updated)

Avenue Supermarts

16/10/2023 06:57

(Adds stock and earnings details, analyst commentary from
paragraph 3)
       BENGALURU, Oct 16 (Reuters) - Shares of India's Avenue
Supermarts  AVEU.NS  posted their steepest drop in five months
on Monday after the DMart store chain operator posted its first
drop in quarterly profit in three years.
    The retailer's standalone profit after tax fell nearly 10%
in the July-September quarter, while its EBITDA margin shrank to
8.1% from 8.6% a year ago, contracting for the fifth straight
quarter, the company said on Saturday.
    And while total revenue rose 18.5%, sales growth slowed in
the high-margin general merchandise and apparel (GMA) business.
The segment's contribution to total sales also fell, to 23.2% in
the first half of fiscal 2024 from 24.75% a year ago.
    Centrum Broking said GMA is the highest-margin category for
DMart, estimating EBITDA margins of over 20% each quarter. It
said the COVID-19 pandemic first delayed a recovery in the unit,
with the current high inflation environment delaying progress.
    Still, Motilal Oswal expects DMart to benefit from a pickup
in discretionary spending in the festival season. That, along
with robust store additions, is likely to drive an improvement
in profit in the second half of fiscal 2024, the brokerage said.
    Both Centrum and Motilal Oswal retained their "buy" ratings
on DMart's stock.
    The average rating of the 24 analysts covering the stock is
"buy" and their median price target is 3,960 rupees, according
to LSEG data.
    DMart shares fell as much as 4.1% on Monday. They were last
down 2.4% at 3,843.55 rupees as of 11:21 a.m. IST, extending
their year-to-date decline to 5.5%.

 (Reporting by Varun Vyas in Bengaluru; Editing by Mrigank
Dhaniwala)
 ((varunvyas.hebbalalu@thomsonreuters.com;))