CMP: 1333.

15 OCT 15th, 2018

AVENUE SUPERMARTS LTD ISIN:
Result Update (PARENT BASIS): Q2 FY19 Overweight
INE192R01011
Index Details SYNOPSIS
Stock Data Avenue Supermarts Limited is a Mumbai-based
Sector Department Stores company, which owns and operates DMart stores.
BSE Code 540376 D-Mart is an emerging national supermarket chain
Face Value 10.00 that offers customers a range of home and personal
52wk. High / Low (Rs.) 1682.00/1062.90 products under one roof.
Volume (2wk. Avg.) 92000 Revenue for the quarter stood at Rs. 48725.20 mn as
Market Cap (Rs. in mn.) 831998.25 against Rs. 35082.67 mn, when compared with the
Annual Estimated Results(A*: Actual / E*: Estimated) prior year period, up by 38.89%.

Years(Rs in mn) FY18A FY19E FY20E During the quarter, EBIDTA is Rs. 4035.00 mn as
Net Sales 150088.93 195115.61 227309.68 against Rs. 3391.11 mn in the corresponding period
EBITDA 14099.59 17381.25 20147.55 of the previous year, an increase of 18.99%.
Net Profit 7846.60 9878.37 11531.73 During the quarter, PBT of the company stood at
EPS 12.57 15.83 18.48 Rs.3490.50 mn as compared to Rs.2930.30 mn in
P/E 106.03 84.22 72.15 the previous year period.

Shareholding Pattern (%) During Q2 FY19, net profit jumps to Rs. 2257.40
mn from Rs. 1910.23 mn in the corresponding
As on Sep 2018 As on Jun 2018 quarter ending of previous year, an increase of
18.17%.
Promoter 81.20 81.20
18.80 18.80 EPS of the company stood at Rs. 3.62 during the
Public
quarter, as against Rs. 3.06 per share over previous
Others -- --
year period.

1 Year Comparative Graph During the quarter, EBIDTA and PAT margins
stood at 8.28% and 4.63% respectively.
D-Mart follows Everyday Low Cost – Everyday
Low Price (EDLC-EDLP) Strategy which aims at
procuring goods at competitive price.
5 stores were added in the H1FY19.
Net Sales and PAT of the company are expected to
grow at a CAGR of 28% and 38% over 2017 to
2020E, respectively.
AVENUE SUPERMARTS LTD S&P BSE SENSEX

PEER GROUPS CMP MARKET CAP EPS(TTM) P/E (X)(TTM) P/BV(X) DIVIDEND
Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)
Avenue Supermarts Ltd 1333.15 831998.25 14.35 92.92 17.92 0.00
Future Retail Ltd 433.90 218064.40 0.51 850.78 7.04 0.00
V2 Retail Ltd. 327.00 11142.20 9.87 33.13 4.12 0.00
V-Mart Retail Ltd. 1993.35 36133.90 44.25 45.05 10.40 20.00

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QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results updates- Q2 FY19,

(Rs in million) Sep-18 Sep-17 % Change

Revenue 48725.20 35082.67 38.89%

Net Profit 2257.40 1910.23 18.17%

EPS 3.62 3.06 18.17%

EBIDTA 4035.00 3391.11 18.99%

Revenue for the quarter stood at Rs. 48725.20 million from Rs. 35082.67 million, when compared with the prior year
period, up by 38.89%. EBIDTA is Rs. 4035.00 million as against Rs. 3391.11 million in the corresponding period of the
previous year, an increase of 18.99%. The company’s net profit jumps to Rs. 2257.40 million as compared to Rs. 1910.23
million in the corresponding quarter ending of previous year, an increase of 18.17%. Reported earnings per share of the
company stood at Rs. 3.62 during the quarter, as against Rs. 3.06 per share over previous year period.

Break up of Expenditure

Value in Rs. Million

Break up of
Expenditure
%
Q2 FY19 Q2 FY18
Change

Purchase of stock-in-
43946.10 32662.10 35%
trade

Employees Benefit
842.00 697.20 21%
Expenses

Depreciation &
443.70 351.40 26%
Amortization Expense

Other Expenses 2244.60 1783.70 26%

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COMPANY PROFILE

Avenue Supermarts Ltd is a Mumbai-based company, which owns and operates DMart stores. D-Mart is an emerging
national supermarket chain that offers customers a range of home and personal products under one roof. The Company
offers a wide range of products with a focus on Foods, Non-Foods (FMCG) and General Merchandise & Apparel product
categories. Each D-Mart store stocks home utility products, including food, toiletries, beauty products, garments,
kitchenware, bed and bath linen, home appliances and others. The Company offers its products under various categories,
such as bed and bath, dairy and frozen, fruits and vegetables, crockery, toys and games, kids apparel, ladies garments,
apparel for men, home and personal care, daily essentials, grocery and staples.

The Company opened its first store in Mumbai, Maharashtra in 2002. As of September 30, 2018, the Company had 160
stores with Retail Business Area of 5.1 million sq. ft. across Maharashtra, Gujarat, Daman, Andhra Pradesh, Karnataka,
Telangana, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Chhattisgarh and Punjab.

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FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as of March 31, 2017 -2020E

FY17A FY18A FY19E FY20E
ASSETS
1) Non-Current Assets
a) Property, plant and equipment 25151.81 32336.53 40097.30 47881.04
b) Capital Work in Progress 1528.94 1470.51 1838.13 1930.04
c) Other intangible assets 63.51 62.04 68.24 70.63
d) Investment properties 273.72 163.26 182.85 198.39
e) Investments in subsidiaries and associate 366.17 1295.02 1605.82 1910.93
f) Financial Assets
i) Other non - current Financial Assets 454.12 480.78 502.42 520.00
g) Other non Current assets 502.15 852.55 1329.98 1556.08
Sub - Total Non- Current Assets 28340.42 36660.68 45624.74 54067.11
2) Current Assets
a) Inventories 9331.60 11470.36 15943.80 17936.77
b) Financial Assets
i) Investments 0.00 517.03 0.00 0.00
ii) Trade receivables 209.98 333.60 600.48 717.58
iii) Cash and bank equivalents 302.59 640.46 781.36 894.65
iv) Bank balances 18510.54 4924.13 5908.96 6854.39
v) Other financial assets 748.78 783.73 811.16 831.43
c) Other Current assets 577.62 794.72 1470.24 1654.02
Sub - Total Current Assets 29681.11 19464.03 25515.99 28888.85
Total Assets (1+2) 58021.53 56124.71 71140.73 82955.95
EQUITY AND LIABILITIES
1) EQUITY
a) Equity Share Capital 6240.85 6240.85 6240.85 6240.85
b) Other equity 32129.79 40186.28 50064.65 61596.38
Total Equity 38370.63 46427.13 56305.50 67837.23
2) Non Current Liabilities
a) Financial Liabilities
i) Borrowings 9809.24 2460.00 1968.00 1554.72
ii) Deferred tax liabilities (Net) 517.45 462.99 629.66 598.18
b) Other non current liabilities 13.84 7.76 4.65 5.24
Sub - Total Non Current Liabilities 10340.53 2930.74 2602.32 2158.13
3) Current Liabilities
a) Financial Liabilities
i) Borrowings 1226.60 72.54 203.11 190.92
ii) Trade payables 2667.55 3158.78 6321.11 6637.17
iii) Other financial liabilities 5012.51 3304.46 5353.23 5781.48
b) Other Current Liabilities 322.06 112.56 180.10 144.08
c) Provisions 81.64 118.49 175.37 206.94
Sub - Total Current Liabilities 9310.37 6766.84 12232.92 12960.59
Total Equity and Liabilities (1+2+3) 58021.53 56124.71 71140.73 82955.95

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Annual Profit & Loss Statement for the period of 2017 to 2020E

Value(Rs.in.mn) FY17A FY18A FY19E FY20E

Description 12m 12m 12m 12m
Net Sales 118811.19 150088.93 195115.61 227309.68
Other Income 312.89 726.48 835.45 939.88
Total Income 119124.08 150815.41 195951.06 228249.56
Expenditure -109174.70 -136715.82 -178569.81 -208102.02
Operating Profit 9949.38 14099.59 17381.25 20147.55
Interest -1218.04 -594.20 -445.65 -347.61
Gross profit 8731.34 13505.39 16935.60 19799.94
Depreciation -1260.21 -1546.52 -1826.44 -2118.67
Profit Before Tax 7471.13 11958.88 15109.17 17681.28
Tax -2644.74 -4112.27 -5230.79 -6149.55
Net Profit 4826.39 7846.60 9878.37 11531.73
Equity capital 6240.85 6240.85 6240.85 6240.85
Reserves 32129.79 40186.28 50064.65 61596.38
Face value 10.00 10.00 10.00 10.00
EPS 7.73 12.57 15.83 18.48

Quarterly Profit & Loss Statement for the period of 31st Mar, 2018 to 31st Dec, 2018E

Value(Rs.in.mn) 31-Mar-18 30-Jun-18 30-Sep-18 31-Dec-18E

Description 3m 3m 3m 3m
Net sales 38099.62 45594.20 48725.20 53597.72
Other income 149.06 142.50 138.60 146.92
Total Income 38248.67 45736.70 48863.80 53744.64
Expenditure -35154.80 -41365.60 -44828.80 -48838.24
Operating profit 3093.87 4371.10 4035.00 4906.39
Interest -131.86 -100.20 -100.80 -95.76
Gross profit 2962.02 4270.90 3934.20 4810.63
Depreciation -465.11 -403.30 -443.70 -488.07
Profit Before Tax 2496.91 3867.60 3490.50 4322.56
Tax -825.93 -1359.70 -1233.10 -1492.58
Net Profit 1670.99 2507.90 2257.40 2829.98
Equity capital 6240.85 6240.85 6240.85 6240.85
Face value 10.00 10.00 10.00 10.00
EPS 2.68 4.02 3.62 4.53

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Ratio Analysis

Particulars FY17A FY18A FY19E FY20E

EPS (Rs.) 7.73 12.57 15.83 18.48
EBITDA Margin (%) 8.37% 9.39% 8.91% 8.86%
PBT Margin (%) 6.29% 7.97% 7.74% 7.78%
PAT Margin (%) 4.06% 5.23% 5.06% 5.07%
P/E Ratio (x) 172.39 106.03 84.22 72.15
ROE (%) 12.58% 16.90% 17.54% 17.00%
ROCE (%) 17.59% 25.64% 26.60% 25.91%
Debt Equity Ratio 0.29 0.05 0.04 0.03
EV/EBITDA (x) 82.84 58.76 47.61 41.00
Book Value (Rs.) 61.48 74.39 90.22 108.70
P/BV 21.68 17.92 14.78 12.26

Charts

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OUTLOOK AND CONCLUSION

 At the current market price of Rs.1333.15, the stock P/E ratio is at 84.22 x FY19E and 72.15 x FY20E respectively.

 Earning per share (EPS) of the company for the earnings for FY19E and FY20E is seen at Rs. 15.83 and Rs. 18.48
respectively.

 Net Sales and PAT of the company are expected to grow at a CAGR of 28% and 38% over 2017 to 2020E,
respectively.

 On the basis of EV/EBITDA, the stock trades at 47.61 x for FY19E and 41.00 x for FY20E.

 Price to Book Value of the stock is expected to be at 14.78 x and 12.26 x for FY19E and FY20E respectively.

 Hence, we say that, we are Overweight in this particular scrip for Medium to Long term investment.

INDUSTRY OVERVIEW

Globally, India is seen as one of the key consumer markets with consumption expenditure set to increase to USD 2 trillion
by 2020 and will surpass the consumption expenditure of several other developed economies. Key factors that will
continue to drive this momentum are

 Favorable demographics
 Rapidly rising education levels
 Steady growth of urbanisation
 Increasing penetration of mobile technology and internet infrastructure
 Increasing aspirations and affordability and
 Government’s focus on reforms, skill development, job creation, infrastructure, manufacturing and investments.

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Private consumption continues to be the largest driver of the economy in the country. Retail industry accounts for 50% of
this consumption. India’s expected GDP growth and consequent private consumption will translate to an increase in the
retail market from USD 616 billion in 2016 to USD 960 billion in 2020. Organized brick and mortar retail stood at USD
55 billion in 2016. The food and groceries (F&G) segment constitutes a majority share of the retail market (67%),
followed by apparel & accessories, consumer electronics and home & living categories. The past year has seen significant
development in the E-tail market in India. This growth trajectory is likely to continue and by 2020 this market to grow to
USD 55 bn, forming 5.7% of retail market.

Opportunities

India is a young country, led by a generation which is more aspirational, well-connected and technology driven. Over the
years, acceleration of urbanization and improvement in education standards has provided better employment
opportunities. The rising incomes of these young Indians will have a significant impact on retailing and consumption of
several categories and products. Organized retail will be a key beneficiary of this rise in consumption. The industry is
expected to grow at a CAGR of 20% to USD 115 bn by 2020, forming 12% of the total retail market. Food and Grocery
will continue to dominate the retail market contributing 66% of the total value in 2020. Apparel & accessories and home
& living are the other two key categories which account for 8% and 4% of the total retail market, respectively. Thus, the
market opportunity is significantly large for all organized retail operators in India.

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The following analysts hereby state that their views about the companies and sectors are on best effort basis to the best of
their knowledge. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. The
analyst qualifications, sectors covered and their exposure if any are tabulated hereunder:

Exposure/Interest to
Sectors company/sector Under
Name of the Analyst Qualifications
Covered Coverage in the Current
Report
Dr.C.V.S.L. Kameswari M.Sc, PGDCA, Pharma & No Interest/ Exposure
M.B.A, Diversified
Ph.D (Finance)
U. Janaki Rao M.B.A Capital No Interest/ Exposure
Goods
B. Anil Kumar M.B.A Auto, IT & No Interest/ Exposure
FMCG
V. Harini Priya M.B.A Diversified No Interest/ Exposure
B. Srikanth M.B.A Diversified No Interest/ Exposure

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