Avenue Supermarts posts strong Q3 results reports Net Profit of Rs. 553 Cr. | Avenue Supermarts Q3FY22 Result Analysis

Avenue Supermarts (DMart) has announced its quarterly results for the quarter ended 31^st December 2021 on Saturday 8^th January 2022. The Company has posted a strong quarterly result and has recorded a consolidated net profit of Rs. 552.6 Cr., up by 23.6% YoY. Let’s discuss more regarding the company’s performance in Q3FY22 in this article as we move ahead.

1) Q3FY22 Result:

• Avenue Supermarts recorded revenue of Rs. 9,218 Cr. in the quarter ended 31^st December 2021 up by 22.2% YoY from Rs. 7,542 Cr. in the quarter ended 31^st December 2020. While Quarter-on-Quarter, the revenue of the company has increased by 18.3% from Rs. 7,789 Cr. in the quarter ended 30^th September 2021.
• The Earnings before Interest, Taxes, and Depreciation & Amortisation (EBITDA) of the company has also gone up by 25.7% YoY from Rs. 689.1 Cr. in Q3FY21 to Rs. 866.5 Cr. in Q3FY22. Sequentially, the EBITDA of the company has also increased from Rs. 668.6 Cr., up by 29.6%.
• The EBITDA margin of the company has increased by 30 bps YoY and 80 bps QoQ to 9.4% in Q3FY22 from 9.1% in Q3FY21 and 8.6% in Q2FY22.
• The Profit Before Tax of DMart stood at Rs. 750.2 Cr. in Q3FY22 up by 23.1% YoY from Rs. 609.4 Cr. in Q3FY21. Sequentially, the Profit Before Tax (PBT) of the company has increased by 32.1% from Rs. 567.7 Cr. in Q2FY22.
• Further, the Net Profit of the company has jumped by 23.6% YoY from Rs. 447 Cr. in the quarter ended 31^st December 2020 to Rs. 552.6 Cr. in the quarter ended 31^st December 2021. Sequentially, the net profit has climbed up by 32.3% from Rs. 417.8 Cr. in the quarter ended 30^th September 2021.
• The Net Profit Margin of the company stood at 6% in Q3FY22.

2) 9MFY22 Performances:

• In the 9MFY22 period, the company earned revenue of Rs. 22,190 Cr. up by 32.6% from Rs. 16,731 Cr. in 9MFY21.
• The Earnings before Interest, Taxes, Depreciation & Amortisation (EBITDA) of the company for the nine-month ended 31^st December 2021 is Rs. 1,759 Cr., up by 55.6% from Rs. 1,130 Cr. for the nine months ended 31^st December 2020.
• The EBITDA margin for 9MFY22 is 7.9% up by 110 bps from 6.8% in 9MFY21.
• The Net Profit of the company for 9MFY22 is Rs. 1,065.7 cr. up by 55.5% against Rs. 685.6 Cr. in 9MFY21.

3) Revenue Growth Trend and Business Highlights:

• The Revenue growth for the company was on an upward trend since Q3FY21 from 10% YoY until Q2FY22 to 46.8%. But the company witnessed recorded revenue growth of 22.2% in Q3FY22, almost more than half of the revenue growth in the previous quarter.
• Key Highlights of this quarter are:
• Overall gross margins are marginally lower due to mixed deterioration
• General merchandise and apparel business is consistently seeing relatively lesser sales contribution while essentials and FMCG are doing better.
• Inflation and lesser opportunities to go out are negatively impacting certain categories more than others.

4) Store Addition Trend:

• The Company added 17 new stores in the third quarter of Financial Year 2022.
• As of December 2021, the Company owns 263 stores (17 stores added in Q3FY22) with a Retail Business Area of 10.3 million sq. ft. across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh, and Punjab.

5) Stock Performance and Valuations:

• The stock of Avenue Supermarts has yielded returns of around 60% in the last year, comfortably beating the benchmark index Nifty 50 which has rallied by around 23-24% in the same duration.

• As of 10^th January 2022, the stock of Avenue Supermarts is trading at Rs. 4,635 at which the Price-to-Earnings (P/E) ratio of the stock is 207.12 which is trading at a premium to its median valuations of 1-years, 3-year, and 5-years.
• The 1-year, 3-years, and 5-years Median PE of the Avenue Supermarts is 202.05. 129.54, and 121.86 respectively.

What Should Shareholders Do?

Avenue Supermarts has reported very strong Q3 results on both fronts i.e., yearly as well as sequentially. On the valuation side, the stock of Avenue Supermarts continues to be trading at a premium valuation, on account of the growth prospect available in the retail industry and the company is performing exceptionally well in snatching healthy market share from the unorganized retail space. Here, one should also expect some kind of consolidation in the stock price, but this stock should be on the Investor’s radar. At this point, do not invest in this stock in a lumpsum manner, but can proceed with the staggered manner of investment.