Avenue Supermarts falls 4% post Q4 results

The stock dipped 4% to Rs 1,433 on the BSE in intra-day trade

Avenue Supermarts , which operates the chain of D-Mart stores, has dipped 4% to Rs 1,433 on the BSE on profit booking despite the company reported a 72.9% year-on-year (y-o-y) growth in its net profit to Rs 1.67 billion in the fourth quarter of FY18. Total Revenue during the period was up 22.4% y-o-y to Rs 38.10 billion.

Analysts on an average had expected profit of Rs 1.86 billion on revenue of Rs 37.77 billion for the quarter.

The company’s EBITDA (earnings before interest, tax, depreciation and amortization) margin improved 100 bps from 6.7% in Q4FY17 to 7.7% in Q4FY18.

Motilal Oswal Securities had expected net profit growth of 82% and revenue growth of 125% y-o-y for the quarter. The broker firm Prabhudas Lilladher expected EBITDA margin improvement of 230bps to 9%.

Like for like growth of Avenue Supermarts has declined from 21.2% in FY17 to 14.2% in FY18.

“FY18 SSS growth at 14.2% (vs. 21.2% in FY17) was impacted by price deflation across staples, change in tax rates post GST (c3% impact in our view) and adverse base due to demonetization,” analysts at IIFL Institutional Equities said in result update.

We cut our FY19ii/20ii EPS by 4/5% to factor in the 4Q miss. DMart’s inability to sustain merchandise mix going forward (share of high margin general merchandise sales in FY18 increased 160bps to 28.4% while that of low-margin foods moderated to 51.6% from 53.3%) remains a risk to our 27% FY18-20 EPS Cagr estimate, the brokerage firm said in report with “reduce’ rating on the stock with 12 month target price of Rs 1,200.

Meanwhile, thus far in the calendar year 2018, the stock had outperformed the market by surging 26% as compared to 2.5% rise in the S&P BSE Sensex till Friday.

At 11:43 am; Avenue Supermarts was trading 2.3% lower at Rs 1,455 against 0.33% rise in the benchmark index. The trading volumes on the counter more than doubled with a combined 1.13 million shares changed hands on the NSE and BSE.