Avenue Supermarts share rises 3% post Q4 earnings


Shares of Avenue Supermarts rose nearly 3 per cent after the company reported a 52 per cent growth in net profit to Rs 414 crore for the quarter ended March 31. Profit in the year-ago period stood at Rs 271 crore.

The share opened with a gain of 2.38 per cent at Rs 2,939 against previous close of Rs 2,888.75 on BSE. The stock touched an intraday high of Rs 2,957.60, rising 3 per cent. However, it shed early morning gains amid profit booking. Avenue Supermarts share ended at Rs 2,848.95, down 1.38 per cent on the BSE.

The stock has gained 28.06 per cent in one year and risen 4.13 per cent since the beginning of this year.

For the January-March quarter, total revenue also grew 17.9 per cent to Rs 7,303 crore. EBITDA rose 47.6 per cent to Rs 617 crore, while EBITDA margin expanded to 8.4 per cent from 6.7 per cent in the March quarter of FY20.

“For FY21, the company reported marginal revenue de-growth of 3% with SSSG coming in at (-) 13.1% (vs. 10.9% in FY20). Despite the share of revenues from the general merchandise & apparel segment declining ~440 bps YoY to 22.9% in FY21 (which yields higher gross margins), the company has managed to maintain its gross margins for the year with a contraction of mere 28 bps YoY to 14.9%, said ICICI Securities.

“Owing to regional lockdowns and restriction on the selling of GM & apparel, we prune our revenue and earnings estimates by 10% and 16%, respectively for FY22E and bake in revenue and earnings CAGR of 21% and 25%, respectively, in FY20-23E. We reiterate Hold rating and maintain a target price of | 3130 (50x FY23E EV/EBITDA),” it added.

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“While we taper down our FY22 recovery/profitability expectations, our FY23 EPS estimates remain largely unchanged (-3%). We maintain our SELL recommendation and DCF-based Target price of Rs 2,160,” said Mr. Jay Gandhi, Institutional Research Analyst, HDFC Securities.

He further stated that the second COVID wave has been more painful for DMART as 80 per cent of stores were operating at less than or equal to 4 hours/day or are shut down for a few weeks/on weekends and a more optimistic inventory plan post the unlock has led to a problem of excess inventory since the second lockdown. This could translate into a working capital-heavy FY22.