DMart is a retail chain owned by Avenue SuperMarts Ltd. which
is promoted by Radha Kishan Damani. RK Damani is one of Dalal Streets legendary
value investors. The company had 112 stores in 41 cities as of 15th
September, 2016. The state wise revenue breakup is given in the next page. The
company’s style is of operating discount stores in sub urban areas. The company
takes into consideration many metrics before opening a new store. The company
prefers to own the retail space rather than lease or rent them.
Industry Overview:
Retail stores in India have struggled to remain profitable.
DMart is one of the few successful names in the sector where the likes of
Kishore Biyani and Mukesh Ambani have struggled to remain profitable
successfully.
India’s retail spend is said to be $616 Billion. DMart
operates in nine states and it plans to stick to these states for expansion.
These nine states account for 65% of India’s retail spend.
Financial Overview:
(In Crores)
Particulars
|
FY12
|
FY13
|
FY14
|
FY15
|
FY16
|
CAGR (5Y)
|
CAGR (3Y)
|
Sales
|
2203
|
3335
|
4681
|
6434
|
8580
|
38.40%
|
37%
|
YoY
Growth
|
51.38%
|
40.36%
|
37.45%
|
33.35%
|
|||
PAT
|
58.9
|
92.2
|
159
|
210
|
318
|
47.50%
|
49.60%
|
YoY
Growth
|
56.54%
|
72.45%
|
32.08%
|
51.43%
|
|||
NPM
|
2.67%
|
2.76%
|
3.40%
|
3.26%
|
3.71%
|
||
NOCF
|
61.7
|
128
|
206
|
207
|
439
|
||
NOCF %
|
104.75%
|
138.83%
|
129.56%
|
98.57%
|
138.05%
|
** NOCF – Net operating
cash flow
The company is growing at a CAGR of 35%+ with it's margins expanding and profits growing faster than sales. The company enjoys significant pricing power and is able to convert it's profits into cash.
Usually companies compromise on profits, margins and cash flows when growing at such a fast rate every year. DMart owns most of the real estate and plans to continue this model of operations which will keep costs low in the long run and increase the book value when real estate prices go up.
But the IPO comes at a P/E level of 46 which is very expensive for a company whose net profit margin is just 3.7%. This leaves no margin for safety. However, no IPO in this market will come at a PE of 15 or 20.
State wise revenue
breakup:
State
|
%
share of revenue
|
Maharashtra
|
62.57%
|
Gujarat
|
18.83%
|
Telangana
|
10.15%
|
Karnataka
|
6.14%
|
Andhra Pradesh
|
1.03%
|
Madhya Pradesh
|
0.85%
|
Chhattisgarh
|
0.43%
|
Per store metrics:
Particulars
|
FY14
|
FY15
|
FY16
|
Number
of Stores
|
75
|
89
|
110
|
Rev/St
(In Crores)
|
62.41
|
72.29
|
78.00
|
PAT/St
(In Crores)
|
2.12
|
2.36
|
2.89
|
IPO Proceeds:
-
The company plans to repay debt which already is
at a tolerable level
-
The company plans to open more stores in the
existing nine states
IPO Details:
Issue Open
|
March 8, 2017 to March 10, 2017
|
Issue Size
|
Rs 1,865.57 Crores
|
Issue Price
|
Rs 295 to Rs 299
|
Market Lot
|
50
|
Minimum Order Quantity
|
50
|
Listing at
|
BSE, NSE
|
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