Radhakishan Damani’s Avenue D MART reported a strong 110% rise in net profit in the July-September quarter but failed to impress investors as the stock tumbled more than 5% on Monday morning.
Analysts too were unimpressed, advising investors to sell the stock, predicting downside potential and highlighting extremely expensive valuations. DMart share price initially hit a high of Rs 5,899 apiece but soon slipped from the highs and was sitting near an intra-day low of Rs 5,014 per share. So far this year, DMart’s share price has galloped a whopping 85%.
Too expensive
Analysts have highlighted DMart’s expensive valuations. The stock’s recent run-up and valuation (92x FY23E EV/EBITDA) have happened without any fundamental change in business prospects, said Edelweiss Securities. “The massive opportunity in organised B&M grocery size is factored in, and a further re-rating is now dependent on significant strides in its online grocery operations or a step-up in-store addition, neither of which is yet visible,” they added.
Although the business has grown despite the challenges posed by the pandemic, ICICI Securities said that the extremely expensive valuation limits their willingness to have a constructive view. Avenue Supermarts trades at 128x P/E on FY23E, according to their estimates.
Business Gang 