Dmart shares trade contrary to Q1 results in Financial Year 2020. Avenue Supermarts led DMart Q1 FY 21 results brought discomfort to its investors. The total revenues fell 33.22 per cent YoY to Rs 3,883 crore in June. Also quarter from Rs 5,815 crore in the year-ago quarter. The profit tumbled 88% to Rs. 40 crore.
Standalone earnings per share fell as much as 86% to ₹0.77 in the June quarter from ₹5.37 in the same period last year. Earnings were hit due to the unprecedented crisis in the wake of the coronavirus pandemic, which led to a sharp drop in footfalls and impacted sales, especially those of non-essential products.
While that is heartening, it’s the drop in the profit margins that’s upsetting. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin contracted by a massive 747 basis points year-on-year to 2.84%. One basis point is one-hundredth of a percentage point. Ebitda margin for the March quarter stood at 6.7%.
Dmart In Trade
In a report, dated 11 July, analysts from JM Financial said. “There appears to have been no saving in ‘other expenses’. Whatsoever, despite some stores being closed for a few weeks altogether”. On a standalone basis. Other expenses rose 22% year-on-year during the June quarter.
Avenue was able to add two stores in the last quarter, taking the store count to 216 as on 30 June. It has recovered about 80% or more of pre-covid sales in most stores where operations are allowed unhindered. “This is a concern, as it implies store level revenue decline of about 20% to continue for the September quarter, even for stores which are fully functional,” said analysts from Credit Suisse Securities (India) Pvt. Ltd in a report on 13 July.
“In this disruptive time, the market share in large city retail is being taken up by mom-and-pop stores (kirana). And e-commerce. The longer the impact of COVID-19, the higher are the chances of some consumers. Which will permanently shift to e-commerce”. Pointed out Credit Suisse analysts.
The stock’s expensive valuations show that investors are ignoring the near-term hit to earnings. Based on Friday’s closing price, the stock trades at about 72 times estimated earnings for 2022, according to Bloomberg data.
Moreover, demand for discretionary products is still biased. Especially for the non-FMCG (fast-moving consumer goods) categories. Which typically enjoy higher margins.
On July 13 11:23 am, the stock was trading at Rs. 2,242.00 on the National Stock Exchange. Therefore, Dmart shares trade.
