Earnings Outlook
Sales recovery, more stores to drive Avenue Supermarts PAT
This story was originally published at 20:17 IST on 9 January 2025
Register to read our real-time news.Informist, Thursday, Jan. 9, 2025
By Avishek Rakshit
KOLKATA – A sharp recovery in sales despite pressure from quick commerce platforms and increased store count are expected to help Avenue Supermarts Ltd. report a healthy profit growth during Oct-Dec.
Although the company will declare its financial results for the December quarter on Saturday, it has already disclosed its revenue for the quarter to bourses last Thursday. According to the company, it has registered a 17.5% on-year growth in its revenues at INR 155.7 billion for Oct-Dec. Sequentially, it is a 10.8% growth. Avenue Supermarts operates the DMart brand of retail stores.
Based on the revenue disclosure by the company, three brokerages have estimated Avenue Supermarts to report a profit after tax of anywhere between INR 8.5 billion and INR 8.9 billion. The highest profit has been estimated by JM Financial Institutional Securities Pvt. Ltd., and the lowest estimate is from Centrum Broking Ltd.
Motilal Oswal Financial Services Ltd. preferred to estimate the company's financial performance at a consolidated level. According to this brokerage, the DMart stores brand owner is likely to report INR 159.8 billion of revenue and a profit attributable to the shareholders of the company at INR 8.0 billion.
In the year-ago period, Avenue Supermarts posted revenue of INR 132.5 billion, and profit after tax of INR 7.4 billion. For the September quarter, the company had reported revenue of INR 140.5 billion, and profit after tax of INR 7.1 billion.
In a report, brokerage Nirmal Bang Equities Pvt. Ltd. said the December quarter is usually a seasonally strong quarter for the retail industry due to the combined effect of festival and marriage seasons. Although Nirmal Bang did not give any financial projection for Avenue Supermarts, it said that mass category products, which have been lagging for the past 18-24 months, are now showing signs of growth, albeit on a low base.
Typically, Avenue Supermarts earns 56% of its revenue from foods products which comprise edible items, staples, dairy, fruits and vegetables, and others. Around 23% of the revenue comes from sales of general merchandise and apparel, and the remaining 21% of revenue comes from sales of consumer goods such as personal care products.
General merchandise and apparel have a higher margin than food products. Based on this, Nuvama Wealth Management Ltd. estimated the retail chain to report a gross margin of 14.5% for the December quarter as against 14.2% in the year-ago period. This, Nuvama said, could lead to an earnings before interest, tax, depreciation, and amortisation margin estimate of 8.4% with an EBITDA of INR 13.0 billion, up 16% on year.
JM Financial said that it expects the EBITDA margin to expand by 20 basis points, largely led by a 20 basis points gross margin expansion. Motilal Oswal, however, cautioned that Avenue Supermarts' consolidated EBITDA margin could contract by 30 basis points on year to 8%.
Avenue Supermarts could report an EBITDA of INR 13.0 billion-13.5 billion for Oct-Dec, according to projections from three brokerages. The lowest estimate has been given by Centrum Broking, and the highest estimate has been given by JM Financial.
Nuvama Wealth Management and JM Financial credited much of the revenue increase to increased store count, which went up by 10 stores to a total of 387 stores as at December-end. But the profit growth, as per JM Financial, could come in from a 3% on year growth in sales per square feet.
At the end of September, Avenue Supermarts had 15.8 million square feet of retail business area which is likely to have gone up due to 10 new store additions. During Jul-Sept, its sales per square feet were INR 8,582 as compared to INR 8,542 in the year-ago period. The company did not declare its sales per square feet for the Oct-Dec quarter in the previous financial year.
Following are the Oct-Dec earnings estimates of Avenue Supermarts, based on reports compiled by Informist from three brokerage houses:
Broker Name | Net Sales (in million rupees) | Net Profit (in million rupees) | EBITDA (in million rupees) |
Centrum Broking Ltd | 1,55,656.00 | 8,516.00 | 12,951.00 |
JM Financial Institutional Securities Pvt Ltd | 1,55,652.00 | 8,930.00 | 13,489.00 |
Nuvama Wealth Management Ltd | 1,55,652.00 | 8,590.00 | 13,006.00 |
Thursday, shares of Avenue Supermarts ended 0.8% down at INR 3,813.8 on the National Stock Exchange.
IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT
Edited by Deepshikha Bhardwaj
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