DMart Q3 Results Review - Margins Shielded Through Cost Control: Motilal Oswal

Motilal Oswal Report

Avenue Supermarts Ltd.’s consolidated/standalone revenue grew 17% YoY, led by 11% store adds. The stabilisation in general merchandise and apparel contribution, combined with controlled costs, cushioned gross margin, leading to a flat YoY performance – a sign of recovery.

DMart's controlled opex resulted in Ebitda/profit after tax growing by 16%/17% YoY. Revenue/Ebitda/profit after tax grew by 18%/10%/3% respectively for nine months FY24.

The gap between revenue/square feet (up 4% YoY) and revenue/store (up 5% YoY) continue to shrink, indicating an improvement in the share of larger-format stores, marking a positive trend.

Further, healthy cost efficiencies and a recovery in discretionary demand are likely to drive growth. We have marginally cut PAT estimates by 3%/1% for FY25E/FY26E.

Subsequently, we arrive at our target price of Rs 4,700 and reiterate our 'Buy' rating on the stock.

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