After the fourth quarter results came, DMart shares fell by about 5 per cent. Should You Buy or Sell?

Shares of Radhakishan Damani D Mart The stock fell to an intraday low of up to 4.86 per cent. 3,501.10 on BSE at Rs. The company’s stock closed at a low of 4.22 per cent. 3,524.80 on BSE.

On a year-to-date basis, the stock has declined over 13 per cent.

Avenue Supermarts standalone net profit up 8.3 percent 505.21 crore for the quarter ending March 2023. 466.35 crore in the corresponding quarter of the previous financial year. Whereas, the revenue from operations grew by 21.11 percent 10,337.12 crore, as against 8,606.09 crore in the corresponding quarter of the previous fiscal.

However, in Q4FY23, DMart’s EBITDA margin declined by 110 bps to 7.3% as compared to 8.4% on a year-on-year basis, while EBITDA was up by 4%. 772 crores.

Here’s what the brokerage has to say:

Prabhudas Leeladhar

We now forecast 16.4% PBT growth in FY24 and 21.5% over FY23-25. We believe D’mart has a huge runway to grow with 1500+ store capacity and D’mart ready to scale up. Keep buying for long term gains. target price reduced from 4,447 4,561 ago.

Motilal Oswal

While strong store adds, coupled with strong cost efficiencies, could play a key role in growth, near-term challenges and rich valuations within the discretionary segment could be key watchdogs for the company.

“The stock, after correction of over 30% since its peak around 18 months ago, now trades at 38.1x EV/EBITDA on FY25E and 60.6x PE, assuming 29% PAT CAGR over FY23-25E. The earnings revision cycle is expected to bottom out and an additional ~10% correction could improve valuations, said brokerage Motilal Oswal.

“We forecast a Revenue / PAT CAGR of 26% / 29% over FY23-25E. We value the company at 40x EV/EBITDA to arrive at a TP of Rs 3,895 on FY 25E basis. We reiterate our neutral stance on the stock.”

ICICI Securities

We have marginally cut our earnings estimates for FY24E / FY25E by 0.1% / 1.3%; Modeled Revenue / EBITDA / PAT CAGR 24% / 25% / 25% over FY23-25E. We maintain Hold with a DCF-based revised target price of Rs 3,800 (earlier it was Rs 3,900). The major downside risks are the slow turnaround of e-commerce operations and higher-than-expected competitive intensity. A significant improvement in footfall is a major upside risk.