Avenue Supermarts – Q2FY22 Result Analysis

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Q2FY22 Result:

Avenue Supermarts- Q2FY22 Results
Avenue Supermarts- Q2FY22 Results
  • In the consolidated results, Avenue Supermarts has posted growth of 50% in its Revenue sequentially and more than 100% growth in its EBITDA and Net Profit on account of low base effect due to lockdown impact because of the second wave of Covid-19 pandemic in the country during March end- May.
  • The Consolidated Revenue of the company has increased by 50.3% QoQ from Rs. 5,183 Cr. in Q1FY22 to Rs. 7,789 Cr. in Q2FY22. While YoY, the revenue of the company has grown by 46.8% from Rs. 5,306 Cr. in Q2FY21.
  • The Earnings Before Interest, Tax, Depreciation & Amortisation (EBITDA) of the company stood at Rs. 668.6 Cr. for Q2FY22 against Rs. 224 Cr. in Q1FY22, amounting to a growth of a significant 198.2%. EBITDA has expanded by 102.9% YoY from Rs. 329.5 Cr. in Q2FY21.
  • The EBITDA margin of the company stood at 8.6% in Q2FY22 against 4.3% and 6.2% in Q1FY22 and Q2FY21 respectively.
  • The Profit Before Tax (PBT) of Avenue Supermarts has increased by 313.2% QoQ from Rs. 137.4 Cr. in Q1FY22 to Rs. 567.7 Cr. in Q2FY22. While the same has increased by 109% YoY from Rs. 271.7 Cr. in Q2FY21.
  • The Net Profit of the company has stood at Rs. 417.8 Cr. in the quarter ended 30th September 2021 growing by 338.4% QoQ from Rs. 95.3 Cr. in the quarter ended 30th June 2021. Likely, the Net Profit of the company has increased by 110.4% YoY from Rs. 198.5 Cr. in the quarter ended 30th September 2020.
  • The Net Profit Margin of the company stood at 5.3% in the quarter ended 30th September 2021 against 1.8% and 3.7% in Q1FY22 and Q1FY22 respectively.
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Half-Yearly Performance:

  • The Revenue from Operations of the company has grown by 41.2% from Rs. 9,189 Cr. in the half-year ended 30th September 2020 to Rs. 12,972 Cr. in the half-year ended 30th September 2021.
  • The EBITDA of the company for H1FY22 stood at Rs. 892.8 cr. against Rs. 441.3 Cr. in H1FY21 up by 102.3%.
  • The EBITDA Margin has also expanded by 210 bps from 4.8% in H1FY21 to 6.9% in H1FY22.
  • The PBT of the company for H1FY22 is Rs. 705 Cr. up by 113.4% from Rs. 330 Cr. in H1FY21.
  • The Net Profit of the company for the half-year ended 30th September 2021 stood at Rs. 513.1 Cr. increased by 115% from Rs. 238.6 Cr. in H1FY21.

Revenue Growth Trend:

Avenue Supermarts- Revenue Growth Trend
Avenue Supermarts- Revenue Growth Trend
  • The Revenue of the company is on an upward trend. From Revenue De-Growth of -34% in the Q1FY21, the company’s revenue growth turned positive on Q3FY21 to 10%.
  • In the Q2FY22, the company witnessed revenue growth of 46.6%, which is also the highest revenue growth over the past 8-9 quarters.
  • Key Drivers for this Revenue Growth are:
  • Covid-19 related lockdown restrictions were eased further during this quarter.
  • Business Operations are likely to improve.
  • A strong Vaccination drive in the country is expected to bring significant normalization of mobility.
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Store Addition Trend:

Avenue Supermarts- Store Addition Trend
Avenue Supermarts- Store Addition Trend

As of September 30, 2021, the Company owns 246 stores (8 stores added in Q2FY22) with a Retail Business Area of 9.44 million sq. ft. across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka, Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh, and Punjab.

DMart Ready:

  • The DMart Ready business continued its gradual expansion across the MMR region, Ahmedabad, Pune, Bangalore, and Hyderabad.
  • Thus far the results on the top line are very encouraging. The second wave has given further impetus to the business.
  • The Company did a soft launch of DMart Ready in the cities of Surat and Vadodara.

Stock Performance:

  • The stock of Avenue Supermarts has yielded returns of around 170% in the last year, comfortably beating the benchmark index Nifty 50 which has rallied by around 60% in the same duration.
  • Recently, on Monday 11th October 2021, Avenue Supermarts entered the list of the top 15 most valued companies by market capitalization as its m-cap hit the Rs. 3 Trillion mark. Currently, Stock PE is around 300.
  • The stock hit a new 52-week high level of Rs. 5,900 on NSE on Monday 18th October 2021.

What Should Investors Do?

The Organized Retail Sector in India is one of the highly underpenetrated sectors in India and here Avenue Supermarts is a strong player and hence the stock enjoyed a premium valuation over the peer stocks.

The company has posted some strong figures in Q2FY22 on account of the low base effect but is unable to beat the estimates of many leading rating agencies and brokerage houses like Morgan Stanley, Credit Suisses, etc., and hence these firms have given ‘Underperform/Underweight’ rating and have given downside price target.

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In the Retail Sector, Avenue Supermarts is one of the strongest players and hence one should keep a close watch on this stock.

Do not take this discussion as direct investment advice and hence follow due diligence before making investment decisions.

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