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Dmart: CMP: 4183: Long Term Sales: 27% H1_FY25_Sales: 16% |H1_Fy_25 RESULT UPDATE
#### *Company Overview:*
Avenue Supermarts Limited, operating under the brand name D-Mart, is a national supermarket chain offering a wide range of products including groceries, dairy, frozen foods, personal care, home care, bed and bath, crockery, footwear, toys, games, and apparel. More than 55% of sales come from the food, groceries & staples division where there is least competition of Ecommerce. The Company opened its first store in Mumbai, Maharashtra in 2002. The Company had 371 operating stores in 22 cities. They open around 30 to 50 stores every year. Retail Business Area of 15.1 million sq. ft across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.
#### *Industry Outlook:*
The retail industry in India is poised for significant growth, driven by increasing consumer spending, urbanization, and expansion of organized retail. The sector is expected to benefit from:
- **Rising Middle Class:** Increased disposable incomes are likely to drive higher spending on retail goods.
- **Digital Transformation:** Adoption of e-commerce and digital payment solutions are transforming the retail landscape.
- **Expansion into Tier II and III Cities:** Retail chains are expanding their footprint into smaller cities, tapping into the growing consumer base.
#### *Peer Group Comparison:*
D-Mart's key competitors in the retail sector include:
- **Reliance Retail:** With a vast network and diversified product range, it is one of the largest retail chains in India. They are India’s Largest retail chain with highest number of retail outlets, Sales and profits. All other combined also are not equal to Reliance retail alone. Reliance Retail is the Giant of the sector.
- **Future Retail:** Known for its Big Bazaar stores, Future Retail also competes in the hypermarket segment.
- **Spencer's Retail:** Operates a chain of supermarkets and hypermarkets.
In comparison, Reliance Retail is Best out of all but as they are not directly listed on stock exchange, Dmart the 2nd runner up is the best with debt free status. D-Mart maintains a strong focus on its EDLC-EDLP strategy, contributing to its competitive pricing and operational efficiency.
#### *Historical Performance:*
They just came up with an IPO during 2017 at the price of 299 & raised an amount of 1870 Cr. With the 1st store in Mumbai in 2002, it crossed 371 stores with more than 1.51 Cr square foot space this year. It took 10 years to open the 1st 10 stores, while 41 Stores opened during this 12 Months alone.
FY_14: Just 10 Years back their sales and Profits were 4687 Cr & 151 Cr respectively.
Fy_18: Came with The IPO at the Price of 299.
FY_19: 5 Years back their sales Profits reached the benchmark of 20,000 Cr & 900 Cr Respectively from total 176 Stores. Price rallied to 1471 which was 5X in just 2 Years.
FY_24: Last year sales Profits reached the benchmark of 50,000 Cr & 2535 Cr Respectively from total 365 Stores. Price rallied to 4525 which was again 3X in 5 Years.
Growth of more than 10X in just 10 years, highly impressive, maintaining Debt-Free Status & even low lease Payment. Wide expansion plans with an optimistic outlook of 30 new stores to be opened every year, it can give a good jump to revenue and profits in the coming time. Have Started expanding even in E-Commerce. Hence, since the IPO, we have discussed this company as the best in the sector and the wealth creator. Many people in our group have held this company since the IPO. Overall we saw Dmart Rallied around 10X in 7 Years.
#### *Current Trend:*
Last year from the beginning itself we saw growth strong but profit margins were squeezed. We ended the Fy_24 with just 7% profits on sales growth of 19% while valuations were 116 PE due to low profit growth.
Dmart's latest financial results for H1 FY25
### **📊 Key Highlights:**
1. **📈 Revenue Growth**:
- **Q2FY25 Revenue**: ₹14,050 crore, showing a 14.2% y-o-y growth (₹12,308 crore in Q2FY24).
- **H1FY25 Revenue**: ₹27,762 crore, a 16.2% y-o-y growth compared to ₹23,892 crore in H1FY24. This shows Q2 dragged this year overall growth.
- **🔄 Like-for-like (LFL) growth**: For H1 FY25, it was 7.4%, and for Q2 FY25, it was 5.5% for stores operating for at least 24 months. Q2 Like to like is also not favorable.
2. **💼 Profitability**:
- **Q2FY25 PAT**: ₹710 crore, 7.9% y-o-y growth (₹659 crore in Q2FY24). PAT margin for Q2FY25 stood at 5.0%.
- **H1FY25 PAT**: ₹1,523 crore, 12.5% y-o-y growth (₹1,354 crore in H1FY24). PAT margin was 5.5%, slightly down from 5.6%. This shows H1 margins were lower dragging profits down.
- **📊 EBITDA Margin**: Stood at 8.4% in H1FY25, compared to 8.5% in H1FY24. This year margin are 10 basis points down.
3. **🏬 Store Expansion**:
- **Stores Opened**: 12 new stores added in H1FY25, bringing the total to **377 stores**.
- **Retail Business Area**: Expanded to **15.8 million sq. ft.**.
4. **🛒 Bills and Sales**:
- **Total Bill Cuts (Transactions)**: Slight decline in Q2FY25 compared to Q1FY25 (from 8.6 crore to 8.5 crore). Q2 dragged bill cut down.
- **Revenue from Sales per Sq. Ft.**: Also saw a slight dip from ₹15.4 in Q1FY25 to ₹15.8 crore in Q2FY25. Sales per sq ft were affected.
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### **📈 Financial Ratios:**
1. **💼 Profitability Ratios**:
- **Return on Net Worth**: 19.1% for H1FY25 compared to 15.1% in H1FY24.
- **📊 Return on Capital Employed (ROCE)**: 19.6% for H1FY25.
2. **📉 Leverage Ratios**:
- **Debt-to-Equity Ratio**: Remained at **0.03x** for H1FY25, reflecting low financial leverage.
3. **💧 Liquidity Ratios**:
- **Current Ratio**: 3.09 for H1FY25, reflecting a strong liquidity position (Current Assets: ₹6,611 crore; Current Liabilities: ₹2,136 crore).
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### **📊 Like-for-Like (LFL) Growth:**
- **Q2FY25**: The LFL growth rate for stores open for 24 months was 5.5%. New stores underperformed.
- **H1FY25**: LFL growth was 7.4%.
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### **🔮 Future Outlook:**
**Short Term**:
- The company expects continuous growth in its store footprint. However, margins might remain under pressure due to competitive pricing strategies and the growing online grocery segment, particularly DMart Ready.
- **🛍️ Online grocery** (DMart Ready) posted a **21.8%** growth in H1 FY25, indicating continued expansion in this channel.
#### *Action:*
D-Mart's H1 FY24 results reflect slow down in LFL Growth, revenue growth and new store openings. All those holding since long and were doing sip during current correction can add more during any fall near 3609 while some 5% Profit booking can be done during expected rally at 6165 Next year once growth is visible.
**Long Term**:
- DMart is well-positioned for long-term growth due to its efficient procurement and supply chain practices, cluster-based expansion strategy, and focus on large-format stores in key cities.
- **🔧 Technology investment** and expanding its e-commerce segment will likely enhance its presence and operational efficiency in the years ahead.
Disclosure: Do not treat this document as a recommendation, this was prepared for educational purposes.
#### *Future Outlook for D-Mart:*
D-Mart's continued focus on efficient operations, competitive pricing, and store expansions positions it well to capture the growing retail market in India. The company's strategy to enhance service levels and build future capabilities indicates a strong commitment to sustaining growth and profitability.
We may see Dmart reach the landmark 1 lakh Cr sales till fy_28. 15% sales & Profit growth can be assumed even next decade. Multi Year rally can be expected along with high and consistent profits.
#### *Disclosure:*
We are not a Tip Provider, do not buy or sell before watching and understanding the data on your own.
