Result Analysis DMART - Q2FY21

Result Analysis DMART - Q2FY21

CMP: 2141 (As on 20-10-2020)

Total revenue from operations at 5,306 Cr 

5,991 Cr (-11.47%) YoY | 3,833 Cr (38.41%) QoQ 

Year ending revenue: 9,189 Cr Vs. 11,805 Cr (-22.11%)

Net Profit of 198.5 Cr 

322.6 Cr (-38.51%) YoY 40.06 Cr (395.13%) QoQ 

Year ending Net profit: 238.6 Cr Vs. 645.7 Cr (-63.14%)

EPS (in Rs.) 3.04

5.11 YoY | 0.61 QoQ 

Six month ending EPS: 3.65 Vs. 10.23

View: Result is in line with the expectation. YoY revenue declined but profit significantly declined despite other income recorded around INR 52 Cr in this quarter as against 8 Cr in YoY. Although result has been improved from QoQ. 

Business Updates & Highlights:

EBITDA in Q2FY21 stood at Rs. 330 crore, as compared to Rs. 517 crore in the corresponding quarter of last year. EBITDA margin stood at 6.2% in Q2FY21 as compared to 8.6% in Q2FY20.

FMCG and staples demand remains robust. September 2020 sales of all stores exceeded September 2019 sales for FMCG and Staples while General Merchandise and Garments did lesser sales in the same period. However, discretionary consumption has seen significant improvement over Q1FY21.

New store openings opened six new DMart stores during the quarter and closed two of Mumbai stores for customers and converted them into fulfillment centers (FC) for ECommerce business.

Financial

ROE and ROCE is around 15.5% and 20% respectively and book value per share is around INR 171 and share is currently trading at 11.6x of its book value. Company is currently trading at annualized PE of around 160 which is very expensive as per Industry benchmark. Promoter holding in company is around 75% which is very strong and stable. FIIs and mutual fund hold around 10.3% and 6.1% respectively. Net cash flow from operating activities as of Sep 2020 was around INR 502 Cr Vs. 1,280 Cr in March 2020. 

Share View: 

Share price high 2,559 (52 week) and now 1,983. Avenue Supermarts Limited is a Mumbai-based company, which owns and operates D-Mart stores. D-Mart is an emerging national supermarket chain that offers customers a range of home and personal products under one roof. The Company offers a wide range of products with a focus on Foods, Non-Foods (FMCG) and General Merchandise & Apparel product categories. The Company opened its first store in Mumbai, Maharashtra in 2002. As of September 30, 2020 the Company had 220 operating stores with Retail Business Area of 8.20 million sqft.

Position:

Share strong support price is INR 1,950/1750. Any good correction will give opportunity to add for long term investors. 

Opportunities

D-Mart follows Everyday low cost - Everyday low price (EDLC-EDLP) strategy which aims at procuring goods at competitive price, using operational and distribution efficiency and thereby delivering value for money to customers by selling at competitive prices. During this quarter company has still opened Six stores. Strong operating cash flow and realization with strong visionary promoters and continuously adding by FPIs and mutual fund Dmart is still in favorite. Month-on-Month sales have improved during this quarter – August was better than July and September was better than August. Highly competitive business and various largest player in this field Reliance retail, Amazon etc. 

Risk

Discretionary consumption continues to be under pressure, especially in the Non-FMCG categories. This is impacting gross margins negatively. 22.7% revenue contribution from General Merchandise and Apparel business in Q2FY21 as compared to the usual 27.3% contribution for the year. 

Sources: Various publications

Disclaimer: The information provided herein is based on publicly available information and other sources believed to be reliable, but involve uncertainties that could cause actual events to differ materially from those expressed or implied in such statements. The document is given for general and information purpose and is neither an investment advice nor an offer to sell nor a solicitation. While due care has been exercised while preparing this document, we do not warrant the completeness or accuracy of the information. We will not accept any liability arising from the use of this material. The recipient of this material should rely on their investigations and take their own professional advice.

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