Avenue Supermarts Ltd's Q3FY19 standalone net profit rises 2.1% yoy to Rs257cr: Misses Estimates

The company’s standalone revenue in the quarter stood at Rs5,451cr, up 33.1% yoy and 11.9% qoq.

Jan 12, 2019 01:01 IST India Infoline Research Team

Avenue Supermarts Ltd Q3FY19

Standalone Results Q3FY19: (in Rs cr)

Q3FY19 YoY (%)
Revenue 5,450.94 33.1
EBITDA 453.33 7.5
EBITDA Margin (%) 8.3 [198]
Net Profit (adjusted) 257.11 2.1
***EBITDA margin change is bps

Avenue Supermarts Ltd’s revenue in Q3FY19 grew 33.1% yoy and 11.9% qoq to Rs5,451cr. EBITDA came in at Rs453cr, up 7.5% yoy and 16.3% qoq. EBITDA margin, however, contracted 198bps yoy and 32bps qoq to 8.32%. The company’s adjusted net profit stood at Rs257cr, up 2.1% yoy and 13.9% qoq. EBITDA and PAT were above the expectations of Rs492cr and Rs293cr respectively.
  • DMart has added four stores in Q3FY19, taking its retail area to 5.3mn sq ft and store count to 164.
  • Price cuts have aided the company to achieve the 33.1% yoy sales growth; however, the same has weighed on gross margins.
  • The company overspent in a bid to manage the festive season better through longer operating hours. Moreover, it continued to operate longer hours at certain stores post-festive season also.
  • Cost of goods sold stood at 85.3% of the sales vs. 83.6%.
  • The company’s operating cost increased during the quarter due to pre-loading of certain expenses, primarily around capability-building across infrastructure and people.
  • Other expenses stood at 4.8% of sales vs. 4.4% yoy.
  • Finance cost increased 35.9% yoy to Rs15cr.
  • Tax rate for the quarter stood at 34.9% vs. 34.6% yoy.
  • By December 30, 2018, of the total IPO proceeds of Rs1,870cr, utilization was Rs1,705cr; of the pending utilization money, the company plans to use Rs81cr for repayment/prepayment of debt and Rs84cr for new stores.
  • The board of the company has approved an increase in the limits for issuance of commercial paper from Rs500cr to Rs900cr. 

The stock currently trades at ~78x its FY20E EPS. A decline in margins was expected on account of heavy discount offerings to support revenue growth. However, the higher-than-expected decline in margins may have been on account of longer operating hours in certain stores. We believe that the margin is likely to remain under pressure due to intense competition. We maintain our reduce view on the stock considering expensive valuations.

Technical View:

Avenue Supermarts Ltd ended at Rs1,568.95, down 17.85 points, or 1.12%, from its previous close of Rs1,586.80 on the BSE. The scrip opened at Rs1,593.25 and touched a high and low of Rs1,596.60 and Rs1,553.55, respectively. A total of 6,65,535 (NSE+BSE) shares were traded on the counter. The stock traded below its 50-DMA.

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