Business Analysis of Avenue Supermart i.e DMart
Department Stores:
Retail is no#1 the fastest growing industry of India. With around 10-12% Market share and E-Commerce Companies with around 4-5% Market share. 80-85% share still with traditional shops. Major E-Commerce Share is in Electronics & Apparel & Less than 1% of Food and Groceries, hence Department stores focus majorly on Food & groceries. World largest Players like Amazon is India’s No#1 Player while Walmart has entered India with some stores and Bought the largest E-Commerce Player Flipkart who already owns Myntra, Jabong, PhonePe, Ekart, etc. Walmart even in talks with Future group to buy a 10% stake. Around 12 Listed Companies, while Biggest is Reliance Retail which is still not listed Individually. Reliance has around 1.3 Lakh cr sales & 5000 cr Profis from 11000 stores which is even larger than the combination of all other stores. The best Company among the whole retail is Reliance on retail and Dmart.
Dmart: CMP: 2398:
Dmart is among one of the largest food and grocery retailers in India with the strategy of (EDLC-EDLP) ie Everyday low cost - Everyday Low Price. They just came up with IPO during 2017 at the price of 299 & raised an amount of 1870 cr. With the 1st store in Mumbai in 2002, today will cross 214 stores this year. They took 10 years to open the 1st 10 stores while 38 Stores opened during this year. They were doing revenue and Profits of 2200 cr & 60 cr respectively during 2012. This year we were expecting revenue and profits of around 25000 cr & 1300 cr respectively and there are. Growth of around 10X in just 8 years, highly impressive. Wide expansion plans of optimistic outlook of 20-25 new stores to be opened every year, it can give a good jump to revenue and profits in the coming time. Yes, they may Cross revenue of 1 Lakh cr & profit of 5000 cr till 2028. Even E-commerce did around 150 cr with 224% growth is a good sign. Hence since IPO, we have discussed this company as best in the sector and the wealth creator. Many people hold this company since the IPO. Current year revenue has grown by 24% & net Profit has grown by 44% which was as expected. Cut in corporate tax cut gave a good jump in profits. So the rise in Profits is due to Government Policies. We were expecting 20.9 eps and they are with 20.7 eps which is almost as expected while we can expect Forward eps of 30 this year. Results are good & at F-EPS of 30 Yield of just 1.6% which is too low. 2 things can help increase yield. 1) if the stock price comes down around 1700 which is our buying range or 2) Earnings growth by more than 50% which they are doing successfully. Should definitely be bought during any fall for long term wealth creation. Can buy during fall near 1700 with this year's target of 3523 as per 95% potential sheet & 9000 till 2030. A wealth creator in the long run. Whole department store segment is good for the long run as this is No#1 growing & Emerging industry should have 1 stock from this industry but remember Dmart & Reliance are best as they are able to grow with very low debt among these. The company holds around 80% shares, Still, no dividend is distributed by the company shows high commitment towards the future. This commitment of not taking dividend could help grow Book value faster which help appreciate the price. We have already discussed previously that D'Mart could enter Nifty-50 in the coming 2-3 years.
Analysis: Dmart started its business with 2 No stores in 2002, which has currently rose to total of approx 239 nos in 2021. This stock can be purchased at Price of Rs 1785 to 1876, for long term view.
Sources:
Various publications
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