Avenue Supermarts Faces Price Target Cuts as Analysts React to Q3 Results and CEO Transition

Avenue Supermarts, the operator of the DMart retail chain, has seen mixed reactions from analysts following its Q3 results and the announcement of a CEO transition. While the company's same-store sales showed some recovery, concerns about future growth and competitive pressures have led to significant price target adjustments from major brokerage firms.

Mixed Analyst Ratings Post-Q3 Results

Among the 30 analysts covering DMart share price, opinions are divided: 11 maintain a "buy" rating, nine recommend "hold," and 10 suggest "sell." This mixed sentiment reflects differing views on the company’s performance and future prospects.

Bernstein remains one of the more optimistic voices, maintaining an "outperform" rating one of the highest among analysts. Bernstein highlighted that while same-store sales saw recovery in the December quarter, it may be largely seasonal. They cautioned that further improvements over the next two quarters might be limited, particularly given ongoing challenges in the FMCG segment.

JPMorgan and Morgan Stanley Cut Price

JPMorgan has taken a more cautious stance, cutting its price while maintaining a "neutral" rating. The brokerage acknowledged some improvement in like-for-like growth momentum, driven by reduced discounting in the FMCG category, especially in metro areas. However, JPMorgan expressed concerns about the sustainability of this growth amidst ongoing market challenges.

Morgan Stanley downgraded Avenue Supermarts to "underweight" and slashed its price . The firm cited management’s recent commentary, which has raised investor concerns about the company’s growth strategy. They also highlighted the impact of competitive pressures and the increasing intensity of discounting in the FMCG segment.

Citi Rating Amid Competitive Pressures

Citi also reduced its price, retaining a "sell" recommendation. The brokerage pointed to heightened discounting intensity in the FMCG category, which has adversely affected turnover in high-volume metro stores. Citi’s cautious outlook underscores concerns about DMart’s ability to maintain its competitive edge in a challenging retail environment.

Conclusion

The divergent views among analysts reflect the complex challenges Avenue Supermarts faces. While some see potential for recovery and long-term growth, others are wary of the near-term hurdles, particularly in the FMCG segment and competitive dynamics. The CEO transition adds another layer of uncertainty, making the coming quarters crucial for the company’s future trajectory.