Avenue Supermarts “D-Mart”Note
Key Market Indicators (Standalone)
Latest Date
04-Sep 2017
Latest Price (Rs) 1020.00
Previous Close (Rs) 1048.35 1 Day Price Var% -2.70
1 Year Price Var% 59.47 52 Week High (Rs) 1068.00
52 Week Low (Rs) 558.75 Beta 0.53
Face Value (Rs) 10.00 Industry PE 90.00
TTM Period 201703 TTM EPS(Rs) 7.73
TTM CEPS(Rs) 9.75 Price/TTM CEPS(x) 104.58
TTM PE (x) 131.89 Price/BV(x) 15.87
EV/TTM EBIDTA(x) 63.58 EV/TTM Sales(x) 5.29
Dividend Yield% 0.00 MCap/TTM Sales(x) 5.32
Latest Book Value (Rs) 64.27 Market Cap (Rs. In Crores) 63656.62
EV (Rs. In Crores) 63256.43 Latest no. of shares (In Crores) 62.41
Share Holding Pattern as on 201706
Promoter % 82.20
FII % -
Free Float % 17.80
Avenue Supermarts (DMART) owns and operates an emerging national supermarketchain, ‘D-MART’. Focused on value retailing.
Over the last five years, it has expanded its total area of operations at a CAGR of 21% to 4.1m sf and grown its sales and PAT at a CAGR of 40%and 51% respectively. Key Takeaways From FY17 Annual Report Of DMART
DMART’s larger focus of expansion would be in states where it is already present.
Tight control over costs was noticed in FY17 which help to increase margin.
FCF was negative but maintained at similar levels as last year with stable capex.
Entered new geographies - NCR, Daman,Rajasthan and Tamil Nadu.
Within the older states, significant store additions were seen in
Karnataka (+5), Telangana & AP (+4) and Gujarat (+3).
ROE moderated to 18% (vs 24% in FY16) owing to equity raising despite improvement in net margins. Fixed asset turnover improved to 4.4 (vs FY16: 4).
Debt/Cash levels. Total debt stood at Rs1100cr while Net cash stood at Rs770cr and will use IPO money to payoff debt and we can see debt free company
E-commerce investments. DMART’s associate Avenue E-Commerce
registered loss of Rs26cr in F17 (Rs12 consolidated as DMART own 49.2% stake). Revenue for E-commerce entity was Rs1.6cr
Company’s basic business model (Key reason for growth)
Every day low cost/ every day low price strategy: to offer higher value
to customer
Focus on higher volume in business and at the same time keeping operating cost low
At the same time, focused on expansion to leverage a better buying
power and economies of scale, that allow company to retain margins while offering fantastic prices
Owned store model, centralized sourcing and efficiency
Page 1 of 8
110 stores ,2016
10 Stores, 2008
1 Stores ,2002
From 1 store in 2002 to 131 at present
Sector-Retail
131 stores,2017
D-Mart has a consistently growing presence across India. Today,131 stores in ten states and one union territory. larger focus of expansion would be in states where company already has a presence. In FY 2017, company added 21 new stores.
D-mart has strong presence in Western india and the states where D-mart operates it constitute 44% of India’s population
Where V-Mart has strong presence in UP, Bihar and NCR
D-mart sells stuff that are part of day to day life plus discritionary
Foods(Dairy,grocery)
27% Non-Food(personel care,home care product)
53% General merchandies and appereals 20%
Value points
1. Industry
private consumption constitutes 60% of India’s GDP, of which retail is around 50%. Share of organised Retail was 9% of total retail in FY 2016 which will grow at 11% CAGR and is expected to touch 12% market share by FY 2020 thereby providing huge opportunity of growth for DMART.
2. DMART derives ~80% of its total revenues from Maharashtra and Gujarat which accounts for 21% of total retail spends in India. DMART intends to invest 75% of its profits in the existing clusters and plans to add 25 stores annually (83.5% increase in area to 7.5m sf by FY21) embellishing its growth potential.
Sector-Retail
3. Key matrices for dmart
FY12 FY13 FY14 FY15 FY16 FY17
No.of stores 55 62 75 89 110 131
YOY - 12.7% 20% 18.5% 23.5% 20%
Revenue per 13,000 18,458 21,399 23938 25,636 29,010 sqft
YOY - 42% 16% 11.8% 7% 13%
Growing retail business area with store and consistent increase in revenue per square foot and Because of that Revenue has posted a strong 40% CAGR
4. Owned store model saves from rental costs and its escalation (FY16 data) Since inception, DMART has understood the basic needs of the customer. It follows no-frills store layouts, opens stores in high catchment residential areas rather than in malls, offers fewer choices of no-frills products and owns most of its stores, resulting in lower operational costs and best-in-class revenue per square foot.
But owing a property comes with its own drawback unlike other retailers who will have significant tax credits on service tax paid on rentals, DMART will not benefit.
5. DMART V/S OTHERS
Companies Dmart Hyper City Spencer's More Bazaar Future Retail
Lease 0.2% 5.5% 5.3% 5.3% 3.9% 8.4% Rentals
DMART saves alot in lease and rental which is main cost in retail industry already they run on paper thin margin so saving on lease helps DMART a lot to maintain margin with giving heavy discount on products
D-mart maintaining an inventory period at 29-30 days and total WC cycle at 9-10 days
6. DMART V/S GlOBAL RETAILERS
Company P/E EV/EBITDA P/B ROE 5 year AVG
Name PAT growth
GLOBAL
Walmart 17 8.3 2.9 17 3%
Costco 27 12 5.2 20.3 2%
Target 14 6.6 3 20.2 3%
Sector-Retail
Tesco 18 6.4 2.1 11.1 1.5%
INDIAN RETAILERS
Trent 42 26 5.8 12.8 34%
V-Mart 55 22 8.9 - 27%
sDMART 122 36.4 10.7 18 35%
Main global comparison for DMART is walmart
Walmart has larger history and last 5 year PAT Avg is 3%
Both companies into discount retails and Walmart is successful in US market and has sustain throughout where DMART has shorter history to look out
Overall industry work on paper thin margin so, turnover is more important metric than PAT margin PAT margin going to be added advantage for DMART for some year
On the other side Tesco is in branding n luxury stores totally different when compare towalmart and DMART
Quarter Result
Quarter On Quarter (Standalone) (Rs in Crore)
Particulars 201706 201703 Q on Q Var% 201606 Y on Y Var%
Net Sales 3598.13 3110.64 15.67 2652.39 35.66
Total Expenditure 3294.89 2902.90 13.50 2417.61 36.29 PBIDT (Excl OI) 303.24 207.74 45.97 234.78 29.16
PAT 174.78 96.67 80.80 118.45 47.56 PBIDTM% (Excl OI) 8.43 6.68 26.20 8.85 -4.75
PBIDTM% 9.06 7.00 29.43 9.04 0.22 PATM% 4.86 3.11 56.27 4.47 8.72
Adj. EPS(Rs) 2.80 1.55 80.65 2.11 32.70
Topline growth 36% led by an increase in sales per sqft from Rs31k to Rs35k and contribution
from 14 new stores opened in 4QFY17and PAT growth of 48% and EBITDA remain stable so
increase in profit is because of lower finance cost this year which directly reflected in PAT
growth and PAT margin increased by 1 % with addition of 21 new stores
Management is optimistic that GST will create excellent opportunities for small and
medium businesses to become preferred suppliers to organized retail in the near to
long term.
Sector-Retail
AGM highlights
At present promoter shareholding is 82% and three year after listing company will reduce it to 75%.
Out of total 131 stores 113 are owned (land may not necessarily owned) and remaining are
leased. Average revenue per sqft is sustainable
Total employee strength 5070
A single new store to generate profit it take at least a year
There are pick-up stores in south Bombay but no planning to open a proper store in south Bombay because of affordability
Size of opportunity is very huge and if company open stores in same region it will still
work and having stores in same region has its own advantages like multiplier effects and cost saving
Promoters of the company don’t want to spend much on ecommerce business so
that’s why company don’t have 100% stake in ecommerce business
Cost of doing business in ecommerce is high as company are more focus on day to day stuff like grocery and that is bulky so cost of delivery is high
Product assortment is more important than cost at which company sell its FMCG Products
95% space is utilized
Shop revenue per store will minimum grow by inflation plus 2% as per company estimate
Company haven’t shut a single shop yet and no shop is running on losses except few new one
Not focused on consumer electronics segment
Will repay certain debts from IPO money but not full debt
D-mart has started private label in FMCG space in Coffee and Toilet soaps, however the contribution to overall sales in negligible and is a non focus area.
GST impacted sales for 15 days of July however business is now back to normal, at present
the company is not able to quantify any positive benefits from GST
Sector-Retail
(RS in CR) Mar- Mar Mar Mar Mar Mar
17 16 15 14 13 12
Revenue 11,988 9258.3 6975.1 5088.8 3648.9 2419.9
YOY 30% 33% 37% 39% 51% #
Gross margin 15% 14% 14% 14% 14% 14%
Total expense 10,993 7924.6 5980.4 4344.7 3125.8 2070.5
4 4 1 5 3
YOY 38% 33% 38% 39% 51% #
EBITDA 994 663.48 458.99 341.78 215.01 138.03
YOY 50% 45% 34% 59% 56% #
EBIT 873 583.04 395.71 300.60 183.47 114.41
YOY 50% 47% 32% 64% 60% #
PAT 428 321.33 211.73 161.37 93.86 60.41
YOY 33% 52% 31% 72% 55% #
PAT margin 4% 3% 3% 3% 3% 2%
Interest 121 90.82 72.36 55.68 42.59 26.02
YOY 33% 26% 30% 31% 64% #
Interest % 1% 1% 1% 1% 1% 1%
The minimum growth of PAT in last 5 year is 30% and that is very healthy where margin remain same for all of the year a small jump this year in margin which is a good change in retail company’s
Description 2017 2016 2015 2014 2013 2012 2011 2010 2009 2008
ROE 18 24 20 18 13 9 8 6 2 0
ROCE 22 24 22 21 15 12 11 9 4 0 EV/EBIT 45 3 4 4 6 8 10 12 26 0
FCF/share -5 -5 -6 -2 -3 -3 -4 -3 -3 0
ROE and ROCE of company slowed down when compare to last two year where Free cash flow is still negative and big change in EV/EBITDA is because of ipo market cap added
Sector-Retail
Bottomline
Stable cash conversion cycle which means Good inventory management
Debt might reduce to zero
ROCE of 20%
CFO is equal to PAT this Year
Growing at the rate of 40%
Valuation wise
Walmart: P/E 17,ROE 17
V-Mart: P/E 45,ROE 13
D-Mart: P/E 120,ROE 18
Financial Snapshot
Payable days 7.62 7.05 7.18 8.91 9.05 10.96
Receivable days 0.46 0.31 0.43 0.82 0.95 0.85
Inventors days 22.69 23.88 24.02 23.47 23.60 29.52
Asset Turnover(x) 2.89 3.41 3.11 2.85 2.49 2.04
Inventory Turnover(x) 16.09 15.54 14.39 15.06 15.05 14.53 Cash Profit 608.66 415.01 291.99 216.07 137.97 96.59
Total Debt (Long Term plus Short Term) 1481.1 1177.2 887.51 623.91 524.74 380.68 3 7
Capital Employed 5318.1 2689.1 2081.1 1574.2 1310.7 1060.3 9 3 9 4 8 0
Gross Block 2744.4 2162.3 1810.8 1392.8 1110.9 922.35 0 9 7 9 5 Investments 63.99 29.65 16.66 17.34 4.22 10.23
Cash and Bank balance 1881.3 32.59 35.86 51.92 58.90 44.65 1
Net Current Assets (Including Current 2037.0 186.89 231.74 128.14 62.42 45.53 Investments) 7
Total Current Liabilities 931.04 603.05 391.78 343.27 298.22 217.37 Total Assets 5802.1 3081.5 2347.8 1791.5 1490.4 1187.1 5 3 0 7 0 0
Cash Flow from Operations 448.82 425.26 207.38 205.89 127.64 61.67 Cash Flow from Investing activities - - - - - - 2474.6 624.99 461.21 266.09 229.32 125.89
Key Ratios
Sector-Retail
Debt to Equity(x) 0.39 0.78 0.74 0.66 0.67 0.56
Current Ratio(x) 3.19 1.31 1.59 1.37 1.21 1.21
ROCE(%) 21.70 24.30 21.53 20.64 15.30 11.62
RONW(%) 18.05 23.50 19.72 18.39 12.61 9.36
PBIDTM(%) 7.76 7.32 7.37 7.57 6.80 6.82
PATM(%) 4 3.44 3.29 3.41 2.77 2.69
CPM(%) 4.75 4.49 4.54 4.62 4.14 4.39
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