Avenue Supermarts Ltd. share price target

We cut FY19 and FY20 EPS estimates of D'Mart by 10.7% and 5% following 200bps margin decline and just 2% PAT growth in 3Q19. D'Mart continues to focus on strong sales led by Everyday Low price strategy. Margins have been impacted by higher spends behind new store infrastructure, people and expenses to manage festive demand through higher operating hours. D'Mart has lowered prices across categories led by benefits from higher economies of scale which reinforces its pole position of a value retailer. D'Mart has growth strategy is place led by 1) gradual acceleration in store...

by 33% YoY to INR54.5b (in-line) in 3QFY19. However, the company continued facing margin pressure (gross margin down 170bp YoY to 14.7% 13 January 2018 off a high base), mainly due to its focus on price competitiveness. Consequently, EBITDA increased by a modest 7.5% YoY to INR4.5b (5% miss), with the margin contracting 200bp YoY to 8.3%. PAT, too, grew by a marginal 2.1% YoY (8% miss) to INR2.6b due to lower other income (-37% YoY) and higher depreciation/finance cost (+33%/36% YoY). DMART added nine new stores in 9MFY19, (four in 3QFY19), taking its store count to 164. The store addition trend appears similar to last year 10 new stores added in 9MFY18. We, however, note that DMART tends to accelerate store addition toward the fiscal-end (14 new stores added in 4QFY18). In 4QFY19, too, it is likely to add 13-14 new stores.

Top line growth improves, but margin declines... Avenue Supermarts Ltd (D'Mart) owns & operates India's most profitable supermarket, D'Mart. It provides products like Foods, Non-Foods (FMCG), general Merchandise and Apparel categories through 160 stores (5.1 mn sq. ft). D'Mart reported a robust revenue growth of ~39%YoY in Q2FY19, but EBITDA margin declined by 110bps YoY due to decline in gross margin. Gross margin declined by 180bps to 14.3% as the company focused on top line growth by reducing prices indicating competitive pressure....

Avenue Supermarts Ltd Q2FY19 results Comment Revenue increased by 6.87% to Rs. 4872.52 Cr in Q2FY19 when compared to the previous quarter. Also, it grew by 38.94% when compared with Q2FY18.

15 October 2018 Avenue Supermarts (DMart) revenue increased 39% YoY to INR48.7b (estimated INR44.6b) in 2QFY19. EBITDA/PAT; however, grew 23%/18% YoY to INR3.9b/INR2.3b (estimated INR4.4b/INR2.6b) lagging much below revenue growth. This is primarily due to 180bp decline in gross margin to 14.3%. In the recent analyst meet, management had highlighted that the high EBITDA margin may not be sustainable as the company plans to prioritize price competitiveness v/s margin improvements. recent analyst meet, the company reiterated its strategy to accelerate store addition; it also plans to explore the leasing model. Although, the company does not have a set target, it plans to add 25-30 stores annually. In 2QFY19, DMart added three new stores (five stores in 1HFY19), taking its total store count to 160. The company had added 24 stores in FY18, of which 14 were in 4Q.

DMart's 2QFY19 earnings-report reflects a massive margin disappointment (8% vs 9.1% in 2Q LY and 8.9% for FY18) which is likely to mask the excitement that a 38.9% growth in revenue would otherwise have created. The business has brought down prices across categories to further drive store-throughput; the consequent EBITDA miss of 3.7% vs our forecast, however, means that the incremental revenue garnered through the price-cuts (2QFY19 revenue was 8.7% ahead of our expectation) have not been able to entirely protect the business' profit pool at least not just yet. We reckon it could take a few quarters before operating leverage starts to entirely offset the margin erosion impact, but we are confident...

Avenue Supermarts Ltd (D'Mart) owns & operates India's most profitable supermarket, D'Mart. It provides products like Foods, Non-Foods (FMCG), general Merchandise and Apparel categories under 157 stores (5 million sq. ft). D'Mart continued to report a stupendous earnings growth of 43%YoY for Q1FY19 supported by strong revenue/EBITDA growth of 27%/39% YoY. Recent robust store additions supported growth, added 16 stores in last 2 quarters and is considering leased stores to accelerate growth further. Gross margins improved only 10bps as D'Mart sells at discount prices,...

Revenue grew by 19.67% to Rs. 4559.42 Cr in Q1FY19 when compared to the previous quarter. Avenue Supermarts Ltd Q1FY19 results Comment

ICICI Securities Ltd | Retail Equity Research We recently attended the Annual Investor Meet of Avenue Supermarts (DMart) to get an insight into its business model and future prospects. Despite various players struggling to operate grocery business owing to its wafer thin margins, D-mart has successfully cracked the model by using its EDLC (Everyday Low Cost) / EDLP (Everyday Low Price) strategy. The strategy involves offering low prices to consumers on a daily basis excelled by low procurement and tight operational cost. D-Mart follows a cluster based approach for opening new stores for efficient utilisation...

Investor Meet 2018: Simplicity is the best policy Some pearls of wisdom' from DMart's maiden post-IPO management meet: 1) It would be extremely foolish to not leverage the company's best-in-class cost efficiencies to offer the best prices to consumers and ring-fence them. If competitors cut prices, DMart will cut even more. 2) Inflation is good for consumer businesses as it provides higher value-growth' and lends some sort of leverage and margin support. 3) Retail opportunity in India is so large ($616bn in FY16, set to rise to $960bn by FY20; DMart is yet to set up shops in states that account for c.45% of the country's retail spends) that there is no point worrying about...