Neutral Avenue Supermarts Ltd For Target Rs. 3,105 - Motilal Oswal
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D-Mart – Revenue/ Store Update
Highlights from DMART’s pre-quarterly update for 1QFY22
Revenue up 30% YoY, but 13% below pre-COVID levels:
* Revenue rose 30% YoY to INR503.2b in 1QFY22, 5% below our estimate and 13% below pre-COVID (1QFY20) levels.
* Category-wise, we estimate non-Discretionary revenue (Food and nonFood FMCG), which constitutes 77% of total revenue, to have achieved 95% of pre-COVID revenue (1QFY20), with Discretionary revenue touching 60% levels.
* This is much better than other listed Apparel retailers, which are expected to clock 35-45% of pre-COVID levels.
* In the last eight quarters, it has seen 29% footprint additions (52 stores). Adjusting for the same, the LTL revenue for nonDiscretionary/Discretionary category would be ~65%/30%.
Added four stores
* DMART added four stores during 1QFY22 against our expectation of two stores. Our full-year expectation is 30 stores, implying an additional 26 stores in 9MFY22.
* Targets 39 store additions in FY22: The management had indicated it will add 59 stores over FY20-22. It has added 20 stores in FY21. Thus, it may look to add 39 stores in FY22, implying an additional 35 store over the next nine months.
Business outlook remains healthy
* Unlike 4QFY21, the management has refrained from providing an outlook, which has been the norm, given the weak market environment. Our channel checks suggest that the non-Discretionary category has seen a healthy recovery to near pre-COVID levels, post the lifting of lockdown restrictions.
* DMART’s Discretionary category has seen a healthy performance, benefiting from downtrading towards the value category.
* In the Retail industry, DMART has seen the best recovery from pre-COVID levels. Its well capitalized Balance Sheet should allow it to add stores at a steady pace.
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