Radhakishan Damani’s DMart shares jump on Q1FY22 update, but analysts are not excited

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Shares of Radhakishan Damani-owned DMart inched higher on Monday after the company announced a pre-quarterly update of Q1FY22. At 2:50 pm the scrip quoted Rs 3,353.95 apiece, up 1.2%. On an intraday basis, the stock swung between a high of Rs 3,395 and a low of Rs 3,341.30.

Avenue Supermarts, the parent of the Mumbai-based retailer DMart reported 31.27% jump in standalone revenue from operations to Rs 5,031.75 crore in quarter ended June 2021 versus Rs 3,833.23 crore in the same quarter of the previous fiscal.

Brokerage view

Commenting on the update Motilal Oswal in a report wrote that the company’s revenue was up 30% year-on-year (YoY), but 13% below pre-Covid (Q1FY20) levels. ”Category-wise, we estimate non-Discretionary revenue (Food and non-Food FMCG), which constitutes 77% of total revenue, to have achieved 95% of pre-COVID revenue (1QFY20), with Discretionary revenue touching 60% levels,” the brokerage said. However, it said that this is much better than other listed Apparel retailers, which are expected to clock 35-45% of pre-covid levels.

DMart’s total number of stores as of June 30, 2021, stood at 238. It added four stores during Q1FY22. The management had indicated that the company will add 59 stores over FY20-22.

The company is scheduled to report its quarterly earnings on July 10.

Global brokerage Citi has maintained a ‘sell’ rating on the stock with a target of Rs 2,210. It complained of a much slower-than-expected start to FY22. This brokerage said reported revenues were 20 per cent below its estimates.

“Given last year’s base, Q1 was perhaps a key driver of the sharp rebound forecast,” it said, adding that further downside to earnings is likely.

Whereas Motilal Oswal has a neutral rating on the stock with a price target of Rs 3,105 per share. ”DMart’s discretionary category has seen a healthy performance, benefiting from downtrading towards the value category. In the retail industry, DMart has seen the best recovery from pre-covid levels. It is well-capitalized balance sheet should allow it to add stores at a steady pace,” the note said.