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Impact of 2nd Covid Wave on D-Mart Stock

Impact of 2nd Covid Wave on D-Mart Stock

Published on 11 May 2021 Views 124 Comments 0

Avenue Supermarts has announced its quarterly results for Q4FY21 on Saturday 8th May 2021. In this blog we will be analyzing the Q4FY21 results of the company and will also put some light on how does Second Wave of Covid-19 will impact the business or operation of D-Mart.

Introduction:

Avenue Supermarts, one of the key players in the Retail Sector in India have declared its Q4FY21 results on Saturday 8th May 2021. We will consider the standalone result of the company.

Q4FY21 Results- Standalone:

  • Revenue of the company was around Rs. 7,303 Cr. in Q4FY21. It has grown by 17.9% YoY.
  • EBITDA of the company has grown by 47.6% YoY to Rs. 617 Cr. in Q4FY21 which shows that company has improved the operational efficiency very well.
  • Profit After Tax (PAT) of DMart has gone up by 51.6% YoY to Rs. 435 in the quarter ended 31st March 2021.
  • In the last quarter of FY21, the company has opened 13 new stores.

FY21 Performance:

  • On a full-year basis, the Total Revenue of the company is down by 3.6% and EBITDA is also down by 17.9%.
  • In FY21, the company has added 22 new stores, of which 13 stores were opened in the last quarter alone. Also, 2 stores were converted into Fulfilment Centres for Avenue Ecommerce Limited, their online business.

Impact of Second Wave of Covid-19 on the Business:

i) Store Operations:

  • In March 2021, the company is facing significant disruption in its Store Operation.
  • 80% of the stores are severely impacted by the second wave of Covid-19 due to the presence of mini-lockdowns, strict lockdowns, fixed time of opening and closure of stores in several parts of the country.
  • This disruption will heavily impact the revenue of the company which will be visible in the Q1 of FY22.

ii) Supply Chain:

  • Due to increasing normalcy, and vaccination drive in the country, Q3FY21 and the first 2 months of the Q4FY21 went extremely well for the economy and company as well but then in March 2021, the country witnessed an exponential rise in the covid-19 cases which impacted the operation of the company.
  • This will also lead to an increase in Inventory Days of the company which will further affect the overall profitability too.

iii) Impact on Construction Activity:

  • The company believes in the concept of buying land, constructing and starting the stores.
  • By this strategy, the company has played out well in the retail sector over the period.
  • But now due to hindrance in Construction Activity, it will impact the plans of the company to open new stores in the coming period.

Conclusion:

Currently, the company seems to be opting for a cautious approach due to the rapid rise in the Covid-19 cases in the country post Q4FY21 which will also hamper the profit levels of the company in coming quarters as well. The company has posted an impressive result on yearly basis but has performed poorly in a sequential manner.

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