Market & Forensics Analyst, Beat the Street

Nimish Maheshwari

Market & Forensics Analyst

Beat the Street

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<ul>
<li>The retail landscape in India is witnessing a rapid transformation with the rise of Quick Commerce</li>
<li>These companies are challenging traditional retail models by combining competitive pricing with the convenience of super-fast deliveries.</li>
<li>For Dmart, which has long been the leader in value retailing, this shift presents significant challenges to Same Store Sales Growth (SSSG), store expansion plans, and overall valuation.</li>
</ul>


The retail landscape in India is witnessing a rapid transformation with the rise of Quick Commerce
These companies are challenging traditional retail models by combining competitive pricing with the convenience of super-fast deliveries.
For Dmart, which has long been the leader in value retailing, this shift presents significant challenges to Same Store Sales Growth (SSSG), store expansion plans, and overall valuation.


Impact of Quick Commerce on Dmart's Growth and Valuation

External broker reports(aggregated public sources), Prabhudas Lilladhar

Prabhudas Lilladhar

External broker reports(aggregated public sources)

Prabhudas Lilladher is one of India's leading research based financial services organisation.

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>We cut our FY25/26/27 EPS by 5.0%/5.5%/4.9% and rating from Accumulate to Hold with target price of Rs4748 (Rs5168 earlier).</li><li>Q2FY25 revenue/PAT were miss on our estimate by 3.4%/12.5%.</li><li>This follows disappointing retail metrics as 1) Quick commerce and other online grocery platform players impacted sales in metro cities 2) lower SSG of 5.5% in 2Q vs 9.5% SSG in 1Q 3) tepid growth parameters with growth of 1.2% YoY in Sales/store, 1.6% YoY in bills/store/day and just 0.5% increase in sales/sq ft.</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

We cut our FY25/26/27 EPS by 5.0%/5.5%/4.9% and rating from Accumulate to Hold with target price of Rs4748 (Rs5168 earlier).Q2FY25 revenue/PAT were miss on our estimate by 3.4%/12.5%.This follows disappointing retail metrics as 1) Quick commerce and other online grocery platform players impacted sales in metro cities 2) lower SSG of 5.5% in 2Q vs 9.5% SSG in 1Q 3) tepid growth parameters with growth of 1.2% YoY in Sales/store, 1.6% YoY in bills/store/day and just 0.5% increase in sales/sq ft.Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Avenue Supermarts - Online Retail Hurts 2Q Parameters

External broker reports(aggregated public sources), ICICI Securities Ltd

ICICI Securities Limited

ICICI Securities Ltd

ICICI Securities Limited provides investment services. The Company provides corporate and investment banking, securities, wealth management, retail brokerage, initial public offerings, and advisory services. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>Accelerated ramp-up of online grocery formats (quick commerce) in large metro cities led to deceleration of key growth metrics for DMART: 1) lowest revenue growth (+14% YoY) in a quarter ever, 2) LFL growth at 5.5% vs high-single digits earlier, 3) Footfalls (bill cuts) declined 1% QoQ vs +4% QoQ in base quarter, 4) Revenue throughput per store was flat YoY.</li><li>Retail expansion rate (14% YoY) was stable.</li><li>EBITDA margin was lower by ~30bps due to operating deleverage despite better gross margin (mix-led).</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Accelerated ramp-up of online grocery formats (quick commerce) in large metro cities led to deceleration of key growth metrics for DMART: 1) lowest revenue growth (+14% YoY) in a quarter ever, 2) LFL growth at 5.5% vs high-single digits earlier, 3) Footfalls (bill cuts) declined 1% QoQ vs +4% QoQ in base quarter, 4) Revenue throughput per store was flat YoY.Retail expansion rate (14% YoY) was stable.EBITDA margin was lower by ~30bps due to operating deleverage despite better gross margin (mix-led).Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Avenue Supermarts - Medium-Term Revenue Growth Rates [likely] Getting Reset Lower

External broker reports(aggregated public sources), HDFC Securities

HDFC Securities

HDFC securities is the best online trading platform for stocks, IPOs, mutual fund in India. 

Content available is external broker reports authored by a third party outside the Smartkarma network and has been aggregated by an online aggregator through publicly available sources and is displayed by Smartkarma in this format for user's convenience and general informational purposes only. Content does not constitute investment or financial advice and Smartkarma makes no representation or warranty regarding its accuracy or contents. Original third party author retains all copyright and other proprietary rights in the content. Access or use of third party links not controlled by Smartkarma are at the user's own risk.

<ul><li>Our inferences from DMART’s FY24 annual analyst meet were threefold – (1) pace of store expansion will be a key monitorable, the bottleneck being the availability of unit economics-friendly real estate.</li><li>Currently primed to add 40-45 stores annually. This could keep the ask from SSSG for growth high (HSIE: 18% CAGR over FY24-27) in a disinflationary environment.</li><li>(2) GM profile likely to be stable (14-15%) while focus will be to improve revenue/SKU, ergo sourcing margins which could then be passed on to end consumer to earn higher sales density. </li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Our inferences from DMART’s FY24 annual analyst meet were threefold – (1) pace of store expansion will be a key monitorable, the bottleneck being the availability of unit economics-friendly real estate.Currently primed to add 40-45 stores annually. This could keep the ask from SSSG for growth high (HSIE: 18% CAGR over FY24-27) in a disinflationary environment.(2) GM profile likely to be stable (14-15%) while focus will be to improve revenue/SKU, ergo sourcing margins which could then be passed on to end consumer to earn higher sales density. Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Avenue Supermarts: Pick-Up in Store Expansion Key. Maintain REDUCE

<ul>
<li>Avenue Supermarts: Revenue grew 18.4% to INR 137.12bn in Q1</li>
<li>Sales density back to pre-pandemic times (up 4% YoY, ~INR35.62k/sq ft in Q1FY25)</li>
<li>As expected, share from GM&amp;A continues to normalise upwards which is reflected in improving GMs (up 34bps to 14.9%, in-line)</li>
</ul>
Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.


Avenue Supermarts: Revenue grew 18.4% to INR 137.12bn in Q1
Sales density back to pre-pandemic times (up 4% YoY, ~INR35.62k/sq ft in Q1FY25)
As expected, share from GM&amp;A continues to normalise upwards which is reflected in improving GMs (up 34bps to 14.9%, in-line)

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

India

Avenue Supermarts Ltd. (ASL) owns and operates hypermarkets and supermarkets. The Company offers products such as garments, footwears, toys and games, bed and bath linen, stationery, grocery, household, and electronic products. ASL operates throughout India.

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Avenue Supermarts Ltd (DMART IN)

Impact of Quick Commerce on Dmart's Growth and Valuation

Quick Commerce is revolutionizing retail in India with fast deliveries and competitive pricing, posing challenges for traditional leaders like Dmart.

Nimish Maheshwari

Avenue Supermarts - Online Retail Hurts 2Q Parameters

We cut our FY25/26/27 EPS by 5.0%/5.5%/4.9% and rating from Accumulate to Hold with target price of Rs4748 (Rs5168 earlier). Q2FY25 revenue/PAT...

Prabhudas Lilladhar

Avenue Supermarts - Medium-Term Revenue Growth Rates [likely] Getting Reset Lower

Retail expansion rate (14% YoY) was stable. EBITDA margin was lower by ~30bps due to operating deleverage despite better gross margin (mix-led).

ICICI Securities Limited

Avenue Supermarts: Pick-Up in Store Expansion Key. Maintain REDUCE

Our inferences from DMART’s FY24 annual analyst meet were threefold – (1) pace of store expansion will be a key monitorable

HDFC Securities

Avenue Supermarts - In-Line Print

Avenue Supermarts: Revenue grew 18.4% to INR 137.12bn in Q1. Sales density back to pre-pandemic times (up 4% YoY, ~INR35.62k/sq ft in Q1FY25)

HDFC Securities

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Impact of Quick Commerce on Dmart's Growth and Valuation

​Quick Commerce is revolutionizing retail in India with fast deliveries and competitive pricing, posing challenges for traditional leaders like Dmart.

Nimish Maheshwari

Avenue Supermarts - Online Retail Hurts 2Q Parameters

We cut our FY25/26/27 EPS by 5.0%/5.5%/4.9% and rating from Accumulate to Hold with target price of Rs4748 (Rs5168 earlier). Q2FY25 revenue/PAT...

Prabhudas Lilladhar

Avenue Supermarts - Medium-Term Revenue Growth Rates [likely] Getting Reset Lower

Retail expansion rate (14% YoY) was stable. EBITDA margin was lower by ~30bps due to operating deleverage despite better gross margin (mix-led).

ICICI Securities Limited

Avenue Supermarts: Pick-Up in Store Expansion Key. Maintain REDUCE

Our inferences from DMART’s FY24 annual analyst meet were threefold – (1) pace of store expansion will be a key monitorable

HDFC Securities

Avenue Supermarts - In-Line Print

Avenue Supermarts: Revenue grew 18.4% to INR 137.12bn in Q1. Sales density back to pre-pandemic times (up 4% YoY, ~INR35.62k/sq ft in Q1FY25)

HDFC Securities

Quick Commerce is revolutionizing retail in India with fast deliveries and competitive pricing, posing challenges for traditional leaders like Dmart.