Shares of DMart parent Avenue Supermarts tanked as much as 6% on Monday after the brick-and-mortar retailer's third quarter results disappointed investors.

Reacting to Q3 earnings, the stock fell 6% in the opening trade to ₹3,627 apiece on the National Stock Exchange (NSE). This is the lowest level since July 2022.

The Radhakishan Damani-led value retail chain reported revenue of ₹11,569 crore for the quarter ended December 2022, up 25% year-on-year compared with ₹9,217 crore in the corresponding period a year ago.

Net profit of DMart rose 6.6% to ₹590 crore during the third quarter, missing analysts' estimates of ₹699.3 crore. Profit stood at ₹553 crore in the same quarter of the previous fiscal.

Earnings before interest, tax, depreciation and amortisation (EBITDA) in Q3FY23 stood at ₹965 crore, as compared to ₹866 crore in the corresponding quarter of last year. EBITDA margin stood at 8.3% in Q3 FY23 as compared to 9.4% in Q3 FY22.

Brokerages have mixed views on the counter. Kotak Institutional Equities maintains a 'sell' rating at a target price of ₹3,550, implying a potential downside of 8.1%. The brokerage cut DMart's FY23–25 EPS (earnings per share) estimates by 4-11%, saying it aligns FY23 to nine-month performance, assumes lower same-store sales growth over FY24-25, and bakes in higher operating expenses.

Domestic brokerage Prabhudas Lilladher said Avenue Supermarts' general merchandise and apparel (GM&A) category remains "surprisingly impacted" by high inflation. The category's contribution to sales remains below pre-Covid levels even as the country rebounded from pandemic lows. The broking house has cut the target price to ₹4,675 from ₹4,854 earlier following disappointing margin performance in Q3.

GM&A is the highest margin category for DMart, clocking over 20%, according to Centrum Institutional Research.

Foreign brokerage Morgan Stanley has downgraded the stock to 'equal-weight’ and cut the target price to ₹3,853 from ₹4,590 per share.

Motilal Oswal maintains a 'neutral' rating on the stock with a target price of ₹4,050, given its expensive valuation.

Follow us on Facebook, X, YouTube, Instagram and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon.