MOSL: AVENUE SUPERMARTS (Sell)-Outperformance on most fronts; stratospheric valuations
Avenue Supermarts: Outperformance on most fronts; stratospheric valuations leave little room for rerating
(DMART IN, Mkt Cap USD14.5b, CMP INR1594, TP INR1117, 30% Downside, Sell)
- EBIDTA and PAT exceed estimates: DMart’s revenue increased 27% YoY to INR45.6b (est. of INR43.9b) in 1QFY19. EBIDTA grew 39% YoY to INR4.2b (est. of INR3.8b), with the margin expanding 80bp YoY to 9.3%. Other income declined 38% YoY to INR143m (est. of INR50m). Adj. PAT grew 43% YoY to INR2.5b (est. of INR2.2b). PAT margin expanded 60bp YoY to 5.5% (est. of 5%). We note that the gross margin was relatively low in 1QFY19 on account of the company’s effort to maintain or bring down prices for consumers across categories.
- Added two new stores in 1QFY19; looking to add 25-30 stores annually: DMart added two new stores in the quarter, taking the total store count to 157. In a recent analyst meet, the company reiterated its strategy to accelerate store addition where it will also explore the leasing model. There is no specific target, but the company is looking to add 25-30 stores annually. The company had added 24 stores in FY18, of which 14 were in 4Q. Total store count rose from 131 in FY17 to 155 in FY18, and at a 16% CAGR over FY13-18.
Avenue Supermarts Limited is an India-based company, which owns and operates DMart stores. DMart is a supermarket chain that offers customers a range of home and personal products under one roof. Each DMart store stocks home utility products, including food, toiletries, beauty products, garments, kitchenware, bed and bath linen, home appliances and others. The Company offers its products under various categories, such as bed and bath, dairy and frozen, fruits and vegetables, crockery, toys and games, kids apparel, ladies garments, apparel for men, home and personal care, daily essentials, grocery and staples, and DMart brands. DMart has a presence in over 110 locations across Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Karnataka, Telangana and Chhattisgarh. The Company has multiple stores in cities, such as Mumbai, Ahmedabad, Baroda, Bengaluru, Hyderabad, Pune and Surat.
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