RK Damani stock: DMart climbs 4% on Q2 biz update; what analysts say

Shares of Avenue Supermarts Ltd (DMart) surged 4 per cent in Wednesday's trade after the Radhakishan Damani-led company shared its business update for the September quarter. DMart said its standalone revenue for the quarter increased 19 per cent YoY to about Rs 12,310 crore led by 11 per cent store additions and 7 per cent growth in revenue per store. On a sequential basis, sales rose 6 per cent, led by footprint additions and improved thru-put, DMart said.

Revenue per square feet rose 6 per cent YoY to Rs35,869, which analysts said indicates signs of maturity for larger stores added recently. Following the development, the stock rose 4.07 per cent to hit a high of Rs 3,874.20 on BSE.

Promoters, led by Damani, held 74.65 per cent stake in the company at the end of June quarter.

Kotak Institutional Equities said the year-on-year revenue growth of 18.5 per cent was modestly better than 18.1 per cent YoY posted in the June quarter and provides comfort to its 20 per cent YoY  consolidated revenue growth projection for FY2024E.

"After posting unimpressive throughput per square feet figures for the past two quarters, the nearly Rs36,000 per square feet figure for 2QFY24 is encouraging. Store addition of nine in Q2FY24 and 12 in H1FY24 is tepid in the context of our store addition target of 55 for FY2024. The stock at 68 times FY25 PE is adequately baking in both revenue and margin recovery," Kotak said. It has a fair value of Rs 3,475 on the stock.

Motilal Oswal said the improvement in revenue per square feet indicates improved contribution from larger stores. "Industry-wide commentary has indicated a persistent slowdown in the discretionary category in Q2FY24, which may be still hurting the non-food category (25-30 per cent of revenues). However, it is expected to improve in 3QFY24 with the onset of festive demand," Motilal Oswal while maintaining its 'Buy' rating on the stock.

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