DMart - Discretionary Demand Set To Improve: Motilal Oswal
Apparels to remain weak, while general merchandise to improve.
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Motilal Oswal Report
At its analyst meet, Avenue Supermarts Ltd. reiterated its strategy of ‘Everyday low cost, Everyday low price’ across food, fmcg, general mechandise, apparels and DMart Ready. Following are the key highlights of the event:
The company targets to add 40 stores in FY24. The timing is a challenge due to longer cycles of turnaround and issues like the availability of larger stores and inflation-led high property prices.
In the general merchandise and apparels category, general merchandise is mainly impacted by macro factors, but the apparels category is facing both macro factors and increased competitiveness. However, we believe new categories (like pharma, etc.) should offset the impact.
DMart is optimistic about the e-commerce business and has expressed reasonable clarity that it may not report significant losses. It will focus on the existing 22 cities and big-basket buying through both store pick-up and home delivery channels.
The gross margin impact from GM&A is cushioned by the strategy of direct procurement from grocery brands.
Usually 30.000-35,000 square feet stores mature in about three years, while larger stores (~45,000 sqft) mature in four to five years, giving the company potential to grow more.
We factor in revenue/profit after tax compound annual growth rates of 26%/27% over FY23-25E on the back of 16%/9% area/revenue productivity. Maintain 'Buy'.
Click on the attachment to read the full report:
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.