Avenue Supermarts, which runs a chain of retail stores called DMart, saw a fall in its share price recently by 5%. As the richly-valued Nifty stock has suffered a miss in margins in the results of the March quarter and also in EBITDA, the brokerages have slashed down target prices.
The consolidated PAT of dmart grew 8% year over year in Q4, despite a YoY increase in the company’s revenue by 21%, followed by its expansion. The gross margins declined to the lowest since DMart’s existence in the IPO, except during the Covid period.
DMart’s total store count is 324, with 40 new stores being added in FY2023, and its same-store sales growth was also relatively healthy.
dmart share price, currently trading around Rs.3,400, is always in talks and investors and shareholders keep a close watch on it. To understand the reason, you need to know the company’s background in detail.
Why dmart share price is so crucial?
Under the Companies Act of 1956, DMart was incorporated as a private limited company in 2000 in Mumbai, Maharashtra. Because of its conversion from a private company to a public company, its name changed to Avenue Supermarts Limited in 2012.
The first store was opened in Powai, Mumbai in 2003. Within 2010, the number of stores crossed 25, and the revenues also exceeded Rs.25 million. The company didn’t take more than six years to run more than 100 stores across the country.
The DMart stores now sell everyday products at cheaper rates. They sell products in three categories, general merchandise, food, and non-food.
Let’s check out some quick facts about dmart share price.
- dmart share price nse is trading at around Rs.3439 at present.
- The company’s current market cap is Rs.2,228,895.
- The earning per share (EPS) of Avenue Supermarts for the latest financial year is 36.6, and the EPS for the recent quarter is 7.1.
- The PE Ratio and PB Ratio are 93.72 and 13.70.
Latest updates on the share price of dmart
The PAT growth of 8% year over year is a 25% miss, the reasons behind which are the following:-
- Demand in the margin accretive discretionary category was weak that resulted in a 100bp drop in GM.
- There was no notable increase in-store productivity, neither in revenue nor in square feet, probably because of larger store sizes.
- Since the pandemic, demand at the lower end of the spectrum is never so high.
- Higher prices of fuel, food and other essential commodities have resulted in squeezed household budgets. People have notably cut back on discretionary spending.
dmart is consistently adding larger stores to its retail chain over the last three years to gain enhanced store productivity. After three years, the stores that were smaller earlier can see a growth plateau. Additionally, healthy cost efficiency, softening RM pricing, inflation cool-off, and recovery in discretionary demand may result in earnings growth.
The challenges within the rich valuations and discretionary segment could be vitally monitorable, while substantial cost efficiencies and store additions will likely play a significant role in growth.
Current scenario
dmart share price has corrected 30% from its peak in October 2021. The stock has been remaining significantly higher than Rs.299, its IPO price, though. But the correction has dampened the 18x returns the company offered to its shareholders from its IPO up to 2021.
Radhakishan Damani, a billionaire investor, holds a 75% stake in the company.
The company stock is down by more or less 31% at its peak and underperformed the Nifty Midcap index and Nifty 50 index.
Essential factors to consider
- While Reliance Retail has added 966 stores to triple that of Avenue Supermart stores only in the March quarter, DMart has added only 171 stores between 2019-2023 to reach a total count of 324 only. The sales per square feet for the company have also declined in the last five financial years.
- Consumer confidence, as per the RBI’s survey, is recovering but still needs to go a long way. Consumers are spending less on general merchandise and apparel. While the company already faces a decline or stagnate in its revenue, it faces higher competition in the market as well.
- Lower revenues and increased infrastructure have caused a lower Return on Capital Employed or RoCE for the retail chain since the pandemic.
- The revenue-run rate for the company’s hypermarket DMart Ready has increased, though. Still, the revenue-run rate has remained flat for the last few quarters.
- Unlike its products, the shares of the company trade at a costly rate. Despite higher growth prospects and strong fundamentals, the valuation is still very high.
Conclusion
Although DMart is facing several challenges these days, the company has a robust customer base. It’s just that the retail chain needs to improve its product mix and grow revenues. Sales per square feet is also a crucial factor. Overall, dmart share price is always watch-worthy for investors as long as they monitor these emerging factors.
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