On Monday, Jefferies updated its stance on Avenue Supermarts (DMART:IN), increasing the price target to INR 4,600 from INR 4,300, while keeping a Hold rating on the stock. The move follows the company's recent earnings report, which aligned with Jefferies and consensus estimates for its first-quarter EBITDA. The report highlighted a slight improvement in gross margins, balanced by increased operational costs.
The financial firm noted that Avenue Supermarts' revenue mix has continued to improve since last year's Diwali, a positive trend for the retailer. However, the higher operating costs were attributed to the company's efforts to enhance service levels and invest in future capabilities, as detailed in their press release.
The report also mentioned that DMart opened six new stores in the past quarter, a figure that fell short of expectations set by a strong performance in the fourth quarter of the fiscal year 2024.
Despite the steady growth, Jefferies has opted to maintain its Hold rating on Avenue Supermarts' shares. The decision is based on the company's current valuation, which the firm considers rich despite the long-term potential of the business.
The analyst's comments reflect a cautious optimism, recognizing the company's consistent efforts to improve and expand, while also acknowledging the high expectations already priced into the stock.
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