Avenue Supermarts, which owns and operates D-Mart stores in India, reported a 110% surge in consolidated net profit for the September quarter, as easing COVID-19 restrictions attracted more shoppers and boosted revenue by 47%. The Mumbai-headquartered company added eight stores during the quarter.
Earlier in the session, the stock rose 10.8% to a record high of 5,900 rupees.
However, it gave up gains and was trading 8% lower by 0700 GMT as several brokerages flagged limitations to the stock's upside due to high valuation.
"While we continue to believe Avenue Supermarts is best placed to play the unorganised to organised shift in grocery vertical and believe it has best in industry business model, steep run-up in stock price leave little room for upside and hence we wait for better entry points," PhillipCapital said in a note.
Jefferies, which raised its target price on the stock to 3,700 rupees from 2,300 rupees, also flagged that a sharp rally in share price remains a challenge.
Shares of Avenue Supermarts are up roughly 22% this year, compared with a 13.5% gain in 2020. Of the nine months so far in 2021, it has reported solid gains for six.
The stock trades at a record price-to-earnings ratio of around 165 times forward earnings estimates, according to Refinitiv data as of Thursday's close, making it the ninth most expensive stock in the Indian market.
Around 3.4 million shares changed hands on Monday, compared with 30-day average of around 499,700 shares.
Seven of 28 analysts covering stock have "buy" or "strong buy" rating, 7 have "hold" while 14 rate it at "sell" or "strong sell"; median PT is 3,650 rupees, according to Refinitiv data.
($1 = 75.3000 Indian rupees)
(Reporting by Chandini Monnappa in Bengaluru, additional reporting by Gaurav Dogra; Editing by Krishna Chandra Eluri)