Avenue Supermarts (DMart) Q3 2020 Result Analysis

DMart is a chain of hypermarkets in India. DMart is also known as Avenue Supermarts Limited. It was established in 2000 in Mumbai, India. Radhakishan Damani founded it.

Avenue Supermarts primarily engaged in organized retail and operates supermarkets under the brand name of D-Mart. D-Mart seeks to be a one-stop shopping destination for the entire family, meeting all their daily household needs.

Q3 FY 2019-20 Financial Highlights: DMart Q3 Results 2020

• DMart annual report showcased a strong sales growth of 24.4% YoY to Rs.6,809, driven by a healthy store addition pace in Q3 FY20.
• While the net profit increased by almost 56% YoY to Rs.384 Cr. Lower tax rates (22% vs 36%) boosted the PAT growth to 56% despite 27% PBT growth in Q3 FY20.
• As per the management, sales growth is improved because of a favourable product mix, improved gross margins.
• The stock price has appreciated around 13.5% since the announcement of the recent corporate tax rate cut. Because the benefit of higher free cash flows probably can be passed on through price cuts to consumers to boost revenue growth in coming quarters.

Q3 FY 2019-20 Operating Profit Margin %: Avenue Supermarts Ltd Results: Analysis Of DMart Results

Avenue Supermarts Operating Profit Margin (%): Avenue Supermarts Results

• Operating expenses for Q3 FY20 have grown 24% YoY to Rs.6,325 Cr, with 13.3% QoQ growth.
• It restricted the company's profitability to boost in Q3 FY20 even at a faster pace.
• Operating profit margin % had improved to 8.8% in Q3 FY20 from 8.2% in the same quarter last year, Q3 FY19 and from 8.7% in the previous quarter Q2 FY20.
• It indicates the improvement in the operating efficiency of the company YoY as well as QoQ.
• The gross margin expansion is mainly driven by a change in product mix and pricing renegotiation with vendors.

• The retail sector is need-based. If any business is dependent on need-based consumption, then the economic slowdown won’t affect much of that business’s earnings growth. So, in this case, such businesses won’t find it much difficult to achieve a steady growth graph (economic growth + inflation growth).
• And due to strong earnings visibility, the stocks like Avenue Supermarts, Reliance Industries (due to Reliance Jio + reliance Retail) are trading at a premium valuation.
• These stocks are having a great advantage of a need-based consumption business model to sustain growth trajectory.
• D-Mart’s robust execution on core retail operating parameters in an environment of consumption slowdown is quite impressive. It demonstrates the superiority of its business model.

 Conclusion

• Currently, Avenue Supermarts is tackling only the Tier-1 and Tier-2 cities. And according to its market study, the company may enter the online retail business in the near future.
• Avenue Supermarts is planning to open Mini D-Mart stores with efficient supply chain management strategies like small Kirana stores to improve their presence and penetrate the unrealised market.

You can check out the company’s ratios, financials and DMart share price & DMart stock chart on our website’s stock-o-meter feature.

All in all, the following Avenue Supermarts annual report 2020 will help the investors to make a viable investment decision.

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