Target: ₹4,971
CMP: ₹3,882.10
Avenue Supermarts owners of DMart registered better-than-expected revenues implying positive SSSG (same-store sales growth) over pre‐Covid levels, helped by higher inflation‐led realisations and contribution of stores opened in the last couple of years. Gross margins were higher at 15.8 per cent (up 340 bps year-on-year), driven by higher sales of high-margin discretionary items; cost-saving measures continue to aid operating margins. Its e‐commerce business delivered robust growth of 53 per cent with positive operating profit albeit lower year-on-year.
Strong margin performance in Q1 despite high-margin general merchandise and apparel categories sales still below pre‐Covid levels indicates strong outlook for FY23. Its strong balance sheet, aggressive store expansion, cash generation and solid SSGs, boosted by DMart Ready, should be key growth-enablers and we believe the risks from online retailers should not impact the growth trajectory.
Revenue grew 95 per cent year-on-year (10 per cent above Q1-FY20 after adjusting for 60 per cent store addition) helped further by 10 new store openings in Q1. Gross margins improved 340 bps/150 bps y-o-y/q-o-q driven by scale benefits. EBITDA margin improvement of 170 bps q-o-q to 10.3 per cent aided by continuation of strong cost controls. Our calculated revenue/sq ft and EBITDA/sq ft stood at ₹32,419/sq ft and ₹3,332/sq ft.