Avenue Supermarts, the company behind the popular retail chain DMart, has announced standalone revenues of INR 11,584 crore for the first quarter ending in June.
The company witnessed a significant 18% growth in its standalone revenues, reaching INR 11,584 crore for the first quarter compared to the previous year’s figure of INR 9,806 crore. Additionally, in the preceding quarter of March, the company reported revenues amounting to INR 10,337 crore.
During the quarter under review, the company expanded its presence by opening three new stores, bringing the total number of stores to 327 by the end of June.
In the previous quarter, which ended in March, Avenue Supermarts recorded a year-on-year increase of 8% in standalone net profit, reaching INR 505 crore.
During the fourth quarter, the operating profit of INR 783 crore increased by 5% compared to the previous year. This profit was calculated as earnings before interest, tax, depreciation, and amortization (EBITDA). However, despite the increase in operating profit, the operating margins experienced a decline and reached 7.6%.
According to Motilal Oswal, DMart is anticipated to achieve a compound annual growth rate (CAGR) of 27% in revenue during the fiscal years 2023 to 2025.
The brokerage firm highlighted DMart’s exceptional track record of consistently achieving industry-leading growth, margins, and return on capital employed (ROCE), despite operating with a relatively asset-heavy business model. As a result, they believe that DMart deserves a higher valuation. The brokerage has set a target price of INR 4,200, representing an 18% upside from the current levels.
“While most retailers found it difficult to expand their footprint in the last three years due to Covid, DMart, despite operating on an ownership model, clocked a strong 20% CAGR in area addition over FY20-23, translating into 19% revenue growth,” Motilal Oswal said.
According to the brokerage, over the past five years, DMart’s stock has consistently traded at a valuation of 60 times its EV/EBITDA and a price-to-earnings (PE) ratio of 99x. However, following a 25% correction since September 2022, DMart’s current valuation is now at 36 times its EV/EBITDA and 58x PE based on its FY25 earnings. The brokerage notes that this represents a significant 30% discount compared to historical multiples.
Based on data from Trendlyne, the average target price for Avenue Supermarts is projected to be INR 3,974. Additionally, the consensus estimate indicates a growth potential of 3% for the company.
At the end of Monday’s trading session, DMart shares on the NSE experienced a 0.85% decrease, closing at INR 3,856. Throughout the year, the stock has witnessed a decline of 5.3%.