Avenue Supermarts gains 3% as Q3 results beat Street estimates

Shares of Avenue Supermarts -- owner of DMart supermarket chain -- climbed 3.4 per cent to Rs 1,941 on the BSE on Monday after the company reported a 53.3 per cent year-on-year (YoY) rise in standalone net profit at Rs 394 crore for the quarter ended December 31, 2019 (Q3), beating Street estimates. The stock was trading close to its all-time high of Rs 2,010, hit on November 8, 2019. 

DMart's profit before tax for the period under review stood at Rs 497 crore, a YoY growth of nearly 26 per cent. Net sales for the period grew nearly 24 per cent to Rs 6,752 crore, amid weak consumer sentiment.

Bloomberg had pegged analysts’ estimates of net sales at Rs 6,651 crore for the December quarter while net profit for the quarter was pegged at Rs 359 crore.

The company's earnings before Interest,Tax, Depreciation, and Ammortisation (EBITDA) margins in Q3 came in at 8.8 per cent, which was a growth of 50 basis points over the year-ago period.

Analysts at SBI Securities believe the margin expansion was due to DMart preferring to take new stores on lease (although combination of new store on lease vs. owned is not disclosed), which increased rental expense. Also, the company benefited from the cut in corporate tax rates, analysts said.

The company's store additions during 3QFY20 were at seven stores, taking the total store count to 196 stores at the end of December 2019.

"While there could be an optical benefit of the festive season (which shifted by 12 days) this quarter, we feel that it would be interesting to watch out growth in Q4FY20 as the base effect may be a challenge", the brokerage firm said in result update.

At 10:22, the stock was trading 1.3 per cent higher at Rs 1,899 as compared to 0.58 per cent uptick in the benchmark S&P BSE Sensex. A total of 11.65 lakh shares had changed hands on the NSE and BSE combined. In Q3, Avenue Supermart's stock underperformed the benchmark index by gaining 2.96 per cent as compared to 7.69 per cent surge in the S&P BSE Sensex.