Avenue Supermarts Shares Surge 15% After Strong Q3FY25 Update; Brokerages Provide Mixed Reactions

Avenue Supermarts Ltd., the parent company of DMart, rallied 15% in early trading on January 3, fueled by a robust business update for Q3FY25. The company reported standalone revenue of ₹15,565.23 crore, representing a 17.5% YoY growth compared to ₹13,247 crore in the same period last year. This strong performance was attributed to improved store operations and higher sales. The company now operates 387 stores, reflecting its expanding presence across India.

At 9:20 AM, Avenue Supermarts' stock price soared 10% to ₹3,972.2 on the NSE before climbing further. By mid-morning, shares were trading at ₹4,022.3, marking an increase of 11.39%.

Brokerage Views

The Q3 update drew mixed responses from analysts:

• Macquarie and Morgan Stanley adopted cautious views, citing slower revenue growth compared to historical trends and increasing competition from quick commerce players. Morgan Stanley maintained a target price of ₹3,702, noting that same-store sales growth (SSSG) of 5.5% was slightly above its 4% estimate.
• Conversely, CLSA expressed optimism, maintaining its "outperform" rating with a target price of ₹5,360, suggesting a potential upside of 50%. CLSA highlighted the above-estimate revenue growth and DMart's focus on expanding private-label offerings as key drivers of competitive advantage.

Performance Insights

DMart has faced challenges from rising competition and a slower-than-usual growth trajectory. Analysts also noted pressure from its competitors in quick commerce, affecting its overall momentum. However, DMart's pivot to private labels, which are exclusively sold under its brand, is expected to bolster its position in the retail market.

The company has consistently expanded its store network, adding 10 new stores during the quarter, which aligns with expectations. Historically, DMart has been a reliable growth stock, but current market dynamics may temper investor enthusiasm.

Q2 Highlights

In the preceding quarter (Q2FY25), Avenue Supermarts reported a 5.8% rise in net profit to ₹659.6 crore, compared to ₹623.6 crore in Q2FY24. Revenue for Q2FY25 stood at ₹14,444.5 crore, reflecting a 14.4% YoY growth.

Despite its challenges, DMart's strategic focus on expanding its store count and private labels has positioned it for future growth.