Brokerages Mixed on D-Mart after Good Q3 Numbers

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Brokerages Mixed on D-Mart after Good Q3 Numbers
Credit: © Reuters.

By Aditya Raghunath -- Generally, when a company reports a 10.8% increase in revenues year-over-year and a 42.1% growth quarter-on-quarter, its stock is upgraded by brokerage houses that also increase the 12-month price targets. However, Avenue Supermarts Ltd (NS: AVEU ) (D-Mart) finds itself in the unique position of delivering good results but facing downgrades from brokerages.

The company reported revenues of Rs 7,542 crore for the December quarter (Q3 of FY 2021) and an increase in profit to Rs 446.97 crore compared to Rs 384.04 in the corresponding quarter in 2019. The stock closed at Rs 2,959 on January 11. Credit Suisse (SIX: CSGN ) told CNBCTV18 that it believes the valuations are stretched and maintained an underperform call on the stock with a target of Rs 2,400.

Jefferies downgraded the stock from buy to hold and has given a price target of Rs 3,200, an upside of 8.4% from current levels. A Business Standard report said Kotak Securities believes the stock has a fair valuation price of Rs 1,885 and has given a ‘sell’ call on the stock.

Avenue Supermarkets stock has gained over 35% since October 1 when it was trading at Rs 2,184, and brokerages feel that this has caused stretched valuations. D-Mart added just one offline store in the quarter as it focussed on online expansion. Analysts believe that online play will take some time to show results. If the stock does fall from current levels, it presents a good buying opportunity.

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