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HDFC Securities Institutional Equities
Avenue Supermarts Ltd.'s revenue grew by 17.2%. Sales density, though below pre-pandemic levels, continues to normalise upwards (~Rs 37.3k/square feet in Q3 FY24 versus Rs 38.7k/sq ft in Q3 FY20); up 5% YoY for nine months FY24.
Contribution from general merchandise and apparel has stabilised, and demand trends are encouraging post-Diwali.
Festive season sales were lower than management's expectations in the non-FMCG category. Within FMCG, agri-staples (ex-edible oil) continue to face the brunt of high inflation.
Margins were largely in line. Gross margin stood at 14.2% (versus our estimate: 14.3%) and Ebitdam stood at 8.5% (- 16 bps YoY; versus our estimate: 8.6%).
We largely maintain our estimates and maintain our 'Reduce' rating on DMart, with a discounted cash flow-based target price of Rs 3,400/share (earlier Rs 3,350/share), implying 58 times March-26 price/earning (consolidated).
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