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  • 04 Jan 2023
  • ICICIdirect Research

AVENUE SUPERMARTS CONTINUES TO REPORT STEADY REVENUE GROWTH

DMART - 4151 Change: -55.50 (-1.32 %)

News: Avenue Supermarts continued to report steady growth in standalone revenues in Q3FY23 with three year revenue CAGR of 19% to Rs 11305 crore (up 9% QoQ). On a YoY basis, revenue increased 25%. As per our calculations, revenue/sqft improved sequentially by ~7% to Rs 8990/ sq ft, and continues to remain below pre-Covid levels (~Rs 9600/sq ft). The company added four new stores during the quarter (22 in 9MFY23) taking the total store count to 306

View: Revenue growth was broadly in line with our estimates. The company has maintained its trajectory at 19-20% CAGR witnessed in the previous four to five quarters. Gross margin enhancement would be the critical factor to watch as the management in the preceding quarter had highlighted that inflationary stress was more acute at lower price points in discretionary non-FMCG categories. Festive season would have aided higher footfalls and purchases of discretionary products that could have led to sequential improvement in revenue per square feet, though it is yet to attain pre-Covid levels. In the last three years, it has expanded its area addition by an impressive three-year CAGR of ~ 23% with bigger average size of new stores (~60000+ vs. average 35000 sq ft). The new larger stores that were designed to provide more space for discretionary products have never got an opportunity to function in normal circumstances over the last two years. Hence, the revenue throughput per sq ft has remained below pre-Covid levels. With the scenario now normalised and with larger scale kicking in, we expect the trajectory to improve, going forward. The stock is trading at a rich valuation multiple of 82x FY24E earnings. We believe it captures most positives

Impact: Neutral