DMart Q3 Results Review - Soft Earnings On Weak Discretionary Demand: Motilal Oswal

Motilal Oswal Report

Avenue Supermarts Ltd. posted revenue/profit after tax growth of 25%/7% YoY (6%/18% miss) in Q3 FY23, as weak discretionary demand pulled down same-store sales growth.

While higher size store too increased costs, employee/other expenses per square feet has seen visible cost savings, down down 6%/down 10% versus the pre-Covid level, translating into 5.7% profit after tax margin (closer to pre-Covid levels).

Lower footfall and weak demand in the discretionary non-fmcg segment, along with a 20% increase in the store size, affected store productivity, which may take few quarters to recover.

We estimate an Ebitda/profit after tax compound annual growth rate of 28%/26% over FY23E-25E.

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