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DMart Q3 Results Review - Weak Across Parameters: Dolat Capital

Revenue/square feet was ~down 9.5% same-stores sales growth versus pre-Covid.

<div class="paragraphs"><p>Various brand of oil products kept on shelves inside a&nbsp;DMart store. (Photo: Vijay Sartepe/BQ Prime)</p></div>
Various brand of oil products kept on shelves inside a DMart store. (Photo: Vijay Sartepe/BQ Prime)

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Dolat Capital Report

Avenue Supermarts Ltd.’s Q3 FY23 was tepid across parameters viz. revenues, mix, margins and store adds. Revenue/square feet was ~down 9.5% same-stores sales growth versus pre-Covid.

Adverse product mix impacted gross margin which was lowest ever in Q3 at 14.3% (down 60/down 20 basis points YoY/QoQ). Higher other opex (up 39/6% YoY/QoQ) impacted margins.

After healthy store adds in H1 (18), it was muted in Q3 at four. We reduce our revenue estimates by 3/6/6% for FY23-25 and earnings per share by ~7/13/12% to factor weaker performance.

DMart stock price has seen a healthy time and price correction. But, in backdrop of weak recovery, we expect the stock to go through a further time and price correction in near-term.

Weak revenue growth coupled with muted margin has accentuated problems in near-term and warrant multiple reduction; but for long-term growth and strong business fundamentals of DMart.

Lower than expected SSSG, store expansion, cannibalisation, and shift in organized market to online with DMart’s slow transition are other key risks.

Click on the attachment to read the full report:

Dolat Capital Avenue Supermarkets Q3FY23 Result Update.pdf
Opinion
DMart Q3 Results: Profit, Revenue Up But Miss Estimates, Margin Contracts

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