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Strong Quarter, Optimistic outlook

Electronics Mart (EMIL) had a strong Q3 in the backdrop of good festive season despite seasonally weak period. Revenues were up 21% YoY for Q3FY24 while the SSG stood at 13.4% with sales mix for mobiles/Large Appliances/Mobiles at 42%/44%14% for Q3FY24. Management expects the demand trend to remain positive on expectation of good summer further helping DCR/ NCR region on its way forward for break even. The EBITDA also demonstrated substantial growth, reaching ?1,153 mn in Q3FY24, a 58% increase YoY. The EBITDA margins for Q3FY24 were 6.4% up by 154bps. PAT in Q3FY24 was up 2x YoY to ?458 mn. Management reiterated its margins guidance to be in the range of 6.5% to 7% with revenues growing at ~18-20% YoY primarily driven by the existing stores. In Q3FY24, the company successfully opened 7 MBOs, adding to the 21 stores opened in the first 9 months of FY24. As of December 2023, the company’s store count stands at 147, with 125 leased stores, 11 owned stores, and 11 partly owned and partly leased stores. Going ahead, the company targets opening 25-30 stores in the upcoming years, the company aims to solidify its presence in Telangana, Andhra Pradesh, and Delhi NCR markets. Going ahead the focus on expanding the store network and enhancing the customer experience indicates promising prospects for future growth. Considering the 9MFY24 performance we have tweaked our estimates accordingly and introduced FY26E financials. The company valuations have been reasonable compared to competition and we maintain Buy on the stock with revised PT of ?270.

Q3FY24 Result Summary

Revenues were up 21% YoY for Q3FY24 where contribution from AC remained higher in large appliances. The SSG stood at 13.4% with sales mix for mobiles/Large Appliances/ Mobiles at 42%/44%14% for Q3FY24. In the North Cluster revenues were higher by 51% at ?830 mn while higher by 21% YoY in South cluster. Gross margins were higher due to plugging leakages across costs that are directly proportional to the sales revenues. Going ahead expect 14% gross margins to sustain. Margins during Q3FY24 stood at 6.4(+154bps YoY) largely contributed due to sales of higher margins ACs and fixed cost remained line with expectation. Higher business promotions and ads due to new region additions led to lower margins YoY. PAT in Q3FY24 was up 2x YoY to ?458 mn. In Q3FY24, the company successfully opened 7 MBOs, adding to the 21 stores opened in the first 9 months of FY24

Outlook & Valuation

Clear focus on premium products and strong product depth with only top brands in various categories, 2) focuses on retailing top brands rather than adding private labels to avoid discounting and inventory issues, 3) simple and flat floor and corporate reporting structure, which enables cost controls, quick decision making and higher employee incentives, 4) clear dominance in two states with strong growth potential in the third, which is a much larger market, 5) enjoys superior store metrics than peers, led by higher realisations, higher bill sizes and superior product mix which drive higher store throughputs, 6) robust relationships with top brands in all electronics categories. Considering the 9MFY24 performance we have tweaked our estimates accordingly and introduced FY26E financials. The company valuations have been reasonable compared to competition and we maintain Buy on the stock with revised PT of ?270.

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SEBI Registration number is INM000002483