Avenue Supermarts gains 8% post March quarter results

Shares of Avenue Supermarts, which runs the D-Mart chain of stores, gained 8 per cent to Rs 3,499 on the BSE in Monday’s intra-day trade. The surge comes after the company reported 18.5 per cent year on year (YoY) jumped in its standalone revenue at Rs 8,606 crore in March quarter (Q4FY22). The revenue growth was is in-line with the management's guidance in its prequarterly update.

Besides that, the company's profit after tax (PAT) grew 7.2 per cent YoY at Rs 466 crore, whereas, earnings before interest, taxes, depreciation, and amortization (EBITDA) margins remained flattish YoY at 8.4 per cent.

"January 2022 started extremely well but then the Omicron wave of Covid‐19 reduced the momentum over the middle of the month. These waves typically hurt the high margin and discretionary items more," the management said.

With 50 additional stores in FY22, D-Mart's total store count stood at 284. The company had record openings this year due to pushback from pandemic.

However, despite today’s outperformance, D-Mart has underperformed market in the past one month by falling 16 per cent, as compared to 9 per cent decline in the S&P BSE Sensex. On Friday, May 13, 2022, the stock had hit intra-day low of Rs 3,207, its lowest level since June 2021. The stock has corrected 46 per cent from its 52-week high level of Rs 5,899.90 that it had touched on October 18, 2021.

According to analysts at ICICI Securities, Q4FY22's key highlight was the robust store addition during the quarter (the positive impact for which should be visible in upcoming quarters). “For FY22 same store sales growth recovered to 16.7 per cent after declining by 13.1 per cent in FY21. Revenue per sq. ft. continued to stay below pre-covid levels at Rs 27454/sq. ft. (up 0.5 per cent YoY, FY20: Rs 32879/sq. ft.). The company has witnessed healthy recovery in March 2022 and inflation is allowing to deliver relatively better value to shoppers and manage costs better”, ICICI Securities said.

Meanwhile, analysts at Motilal Oswal Financial Services believe that the company's strong growth footprint and cost optimisation measures drove healthy EBITDA performance in Q4 despite third wave. “However, for the first time, the management deliberated whether the currentn quarter’s soft performance was due to any secular shift in ecommerce. We are cognizant of the prominence of new age grocery model and its rich valuation. Hence, we maintain our 'neutral' rating with a target price of Rs 3,500 assigning 42x EV/EBITDA on FY24E basis,” the brokerage firm added.