Avenue Supermarts Shares Jump 15% on Positive Q3 Update Amid Mixed Brokerage Opinions

Shares of Avenue Supermarts Ltd. surged by 15% during morning trading on January 3, following the release of its business update for the October-December quarter of FY2024-25.

The DMart operator reported standalone revenue from operations at ₹15,565.23 crore, reflecting a 17.5% year-on-year growth compared to ₹13,247 crore during the same period the previous year. As of December 31, 2024, the company operated 387 stores.

At 9:20 AM, Avenue Supermarts’ stock price jumped 10%, trading at ₹3,972.2 on the NSE.

However, international brokerages Macquarie and Morgan Stanley maintained their cautious stance on the stock, citing growth concerns. Both noted that the current growth trend is still below the historical 20% top-line growth. Morgan Stanley acknowledged that the Q3 standalone revenue exceeded its estimates by 1%, with growth largely driven by a 12% increase in the store count. The implied same-store sales growth (SSSG) was estimated at 5.5%, above their projection of 4%. Despite this, the brokerage reiterated its target price of ₹3,702 per share, suggesting a potential 4% upside.

Macquarie raised concerns about increasing competition from quick commerce players affecting DMart’s growth momentum. It also highlighted that the third quarter usually sees a boost in gross margins due to a more favorable product mix. The addition of 10 new stores was consistent with the brokerage's expectations.

Conversely, CLSA, a Hong Kong-based brokerage, remained optimistic about Avenue Supermarts, maintaining its "outperform" rating with a target price of ₹5,360 per share—implying a potential 50% upside. CLSA noted that the standalone revenue exceeded its projections, reinforcing its positive outlook. The firm had previously expressed confidence in DMart’s strategy of expanding private label offerings, which enhances its competitiveness. Private labels refer to brands that are exclusively owned and sold by the retailer.

In Q2 FY2025, Avenue Supermarts posted a net profit of ₹659.6 crore, marking a 5.8% year-on-year increase from ₹623.6 crore. Revenue for the quarter rose 14.4% year-on-year to ₹14,444.5 crore, up from ₹12,624.4 crore in the corresponding period of the previous year.