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Prabhudas Lilladher Report
Avenue Supermarts Ltd. Q4/FY24 results indicated stabilization after erratic performance in operating parameters, as FY24 LTL was 9.9%, bills/store/day steady and H2 average bill value being 1.1% higher than H1 FY24. Sales/store grew by 7.0% YoY, while sales/square feet increased 6.8%.
Cost of retail inched up by 27 bps as DMart added 24 stores in Q4 FY24. Q4 FY24 reported sales and adjusted profit after tax growth of 20.1/22.4% YoY while the same in H2 FY24 stands at 18.6% and 19.4% respectively.
With 41 store additions in FY24, DMart seems slowly getting its act together to accelerate store openings in coming years.
General merchandise and apparel improved in Q4, H2 sales proportion at 21.65% improved by 27 bps YoY, although it declined 67 bps for FY24. We continue to believe that loss of sales in apparel is structural, value formats like Zudio, and Reliance Trends have reduced the consumer appeal of Hypermarts.
We factor in 45/50 store additions, 20.2% compound annual growth rate in sales, 25 bps margin expansion, which will enable 24% PAT CAGR over FY24-26.
DMart LT growth story remains intact with 1500+ store potential in duopoly market and gradual scale up in DMart Ready.
We increase 12 month discounted cash flow based target price to Rs 5031 (1-4% EPS cut) as we rollover to FY26. Maintain Buy.
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