INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: Avenue Supermarts has made it a habit of consistently beating Street estimates, likely prompting even conservative
analysts to upgrade earnings forecasts for the company that runs the DMart retail chain.
Otherwise, rich valuations had made analysts
cautious: According to Bloomberg data, of 14 analysts tracking DMart, eight are negative, two neutral and only four positive
But such performance as evidenced in the June quarter could lead them to review their recommendations on the stock.
Against estimates of Rs
221 crore, the company posted a net profit of Rs 251 crore, 44 per cent more than the previous June quarter
Revenue rose 27 per cent to Rs 4,559.4 crore, ahead of estimates.
Neville Noronha, CEO, said that there was a conscious effort to maintain
or bring down product prices for consumers across categories
Still, gross margin was a tad higher at 15.6 per cent and EBIDTA margins climbed 800 basis points to 9.3 per cent
the company added two stores, taking the count to 157 in total.
In the immediate future, DMart is likely to benefit from improvement in
The stock, which was trading at 127 times trailing earnings before the results, is now trading at 115 times
With a couple of strong quarters, the multiples will start heading south.
The DMart management, which has preferred to remain conservative
in the past, said that the first quarter is seasonally better than most
However, if the company maintains its first quarter earnings growth rate for the next three, the stock could be trading at 87 times FY19
