Buy This Large Cap Retail Stock For 23% Gains, Sales Grew By 36.6% & PAT Up By 62%: Prabhudas Lilladher

Stock Outlook & Returns on investments

On NSE, the stock is currently trading at Rs 4,163 per share, 3.32% down from its previous close. It was opened at Rs 4,283.95 per share. The stock's 52 week low is Rs 3,186 and the 52 week high is Rs 5,900 on NSE, respectively.

The stock in the past 1 week has fallen 7.02% and in the past 1 month 3.92%, respectively. However, it has given 5.89% positive return in the past 3 months. Over a year, it has given 21.9% negative returns to investors. It has given multibagger returns of 115.94% in 3 years and 240.82% in the past 5 years respectively.

Sales grew by 36.6%; PAT up by 62%

Revenues grew by 36.6% YoY and 6% QoQ to Rs106.4bn. Gross margins improved by 18bps YoY to 15.1% (PLe: 15.1%). EBITDA grew by 32% YoY to Rs8.8bn (PLe:Rs9.7bn) while margins contracted by 29bps YoY to 8.3%. (PLe:9%). PAT grew by 61.7% YoY to Rs6.8bn (PLe: Rs6.1bn) which included one-time tax write-off of Rs1.4bn. Excluding one-time tax adjustment, PAT grew by 28% to Rs5.35bn. Cost of retail increased by 47bps YoY to 6.8%.

Discretionary non-FMCG remains under stress

General Merchandise and Apparel segment is recovering, however, remains below the pre-pandemic mark. The inflationary pressure is more acute at lower prices points in discretionary nonFMCG category. Discretionary non-FMCG sales are also lower as footfalls have not recovered to pre-pandemic levels. D'Mart added 18 stores in H1FY23 taking the total store count to 302 with retail Business Area of 12.4mn sq. ft.

D’Mart Ready top-line grows at 82.1%

D'Mart Ready continues to deliver healthy performance with top-line growth of 82.1% YoY and 28% QoQ. D'Mart Ready expanded to 18 cities now, an addition of 6 cities (Anand, Belgaum, Bhilai, Jaipur, Raipur and Vijayawada). However, 90% of D'Mart Ready's sales continue to derive from 5 major cities, namely, Mumbai, Pune, Banglore, Hyderabad and Ahemdabad and they hold on to their Covid-19 revenues.

Growth momentum continues

Prabhudas Lilladher said, "We remain confident of the long-term growth story of D'Mart led by aggressive store expansion and strong demand recovery in the coming festive season. Hence, we retain our "Buy" rating. Average system wide sales/store at Rs357mn were 8% higher than 2Q20, despite store additions in past 6 months. The discretionary non-FMCG is on a recovering track, although lags the pre covid levels. Currently, footfalls are lower than pre-covid levels and basket values are high. As the footfalls improve, discretionary non-FMCG segment is expected to do better."

Prabhudas Lilladher Maintain BUY For Target Price Rs 5,121 per share

D'Mart maintained it gross margins at 15.1%, as estimated by us, while EBITDA margins slipped by 29bps YoY led by high other expenses. "We estimate 39% YoY PAT growth for the 2nd half of FY23 and 42% PAT CAGR over FY22-25. We believe D'Mart has a huge runway to grow with 1500+ store potential (current stores 302) in a consolidated market of modern retail trade, gradual scale up in D'Mart Ready and increase in share of general merchandise and apparel segment. We retain BUY with DCF based target price of Rs 5,121," the brokerage said.

Disclaimer

The stock has been picked from the brokerage report of Prabhudas Lilladher. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.