Thread by @alphaspotcap

Avenue Supermarts Ltd Analysis!🇮🇳

A detailed thread🧵👇🏻
#investing #StocksToBuy

(1/15)

ASL is engaged in the organised retail business through its DMart chain of stores. It was incorporated in the year 2000.

Mr Radhakishan Damani, an equity market investor, is its promoter.

ASL has 263+ hypermarket stores across 13 states and one union territory.

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It’s subsidies:

• ALIGN RETAIL TRADES PRIVATE LIMITED (ARTPL) : is engaged in the business of packing and selling of grocery products, spices, dry fruits, etc.

• AVENUE FOOD PLAZA PRIVATE LIMITED (AFPPL): is engaged in the business of operating food stalls at DMart

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• AVENUE E-COMMERCE Ltd (AEL) : is engaged in the business of online grocery retail

• NAHAR SETH & JOGANI DEVELOPERS PRIVATE Ltd (NSJDPL): is engaged in development of land and construction

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Recovery:

Operating performance improved substantially year-on-year in the first nine months of fiscal 2022, with strong recovery in same-store demand compared with pre-pandemic levels, relaxation of constraints and store additions.

9MFY22 Revenue ₹22190 vs ₹16731 YOY

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• Strong position in the organised retail segment:

The market position is reinforced by steady same-store growth (barring fiscal 2021), retail productivity and short gestation for new stores. ASL operates 263 stores (as on December 31, 2021) under the DMart brand.

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Getting the basics right:

Strong procurement abilities and low-priced products along with high cost control leads to greater footfall. This results in high inventory turnover & revenue per sq ft and translates into industry-leading retail store productivity.

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Financial Risk Profile:

Networth of ASL was ₹12,084 cr as on March 31, 2021, while strong annual cash generation continued despite steady store addition. The company mhas prepaid debt through proceeds of its qualified institutional placement (QIP) in fiscal 2020.

(8/15)

Active expansion plans will led to a big increase of about 20% per annum in retail space to over 10 million sq ft by FY23. Strong cash generation of ₹ 1,800-₹ 2,500 cr per annum is expected to be sufficient for capex, resulting in low dependence on external borrowings

(9/15)

Increasing competition from online players:

Grocery delivery services from online players such as Swiggy and Zepto will only increase as these companies are backed by strong fundings from various ventures

Though ASL has a presence in online space, it is a small player.

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What are some key upward triggers:

• Company’s presence in PAN India, as it focuses more on South and West India right now.

• Sustaining Operating profitably above 9-10%

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• Recent Underperformance:

The company is on the receiving end of the recent rise in inflation due to rising liquidity and Russia Ukraine conflict. Plus fast delivery of FMCG products (under 20mins) is being received well in Metro Cities.

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Recent Numbers:

• Sales Growth 22% YOY
• EBITDA Growth 25.6%
• PAT Growth 24.6%
• EPS Growth 24.6%
• ROE (E) 12.6%
• ROCE (E) 13%
• Debt / Equity - 0.00
• Stock P/E - 174
• PEG Ratio : 6.19

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Shareholding Pattern:

• Promoters : 74.99%
• FIIs : 8.83%
• DIIs : 6.77%
• Public : 9.42

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The company has always commanded a premium valuation due to its strong business model and growth numbers. However, like other sectors, Online players are seeing record traction. So it would be interesting to see how they keep up with the margin/market share going forward

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What are your thoughts about DMart?

@caniravkaria @kuttrapali26 @stockifi_Invest @aparanjape