DMart’s juggarnaut continues – reports strong December quarter

For the quarter ended December 31, 2019, DMart reported a 53.3 per cent yoy rise in net profit at Rs 394 crore. Profit before tax for the period under review stood at Rs 497.34 crore, a YoY growth of nearly 26 per cent. Net sales for the period grew nearly 24 per cent to Rs 6,752 crore.

The Company once again outperformed analysts – consensus had predicted the sales at Rs 6,651 crore and net profit at Rs 359 crore.

EBITDA margins for the quarter came in at 8.8 per cent, which was a growth of 50 basis points over the year-ago period but similar to 8.7% in the previous quarter.

Net profit margin at 5.8 per cent grew by 110 basis points YoY and was similar to 5.6% of the previous quarter.

In a statement, Neville Noronha, managing director (MD) and chief executive officer (CEO), Avenue Supermarts, said the net profit margin improvement in Q3 reflected the revision in corporate tax rate, which was slashed to 22 per cent from 30 per cent in September 2019.

DMart added seven stores in Q3, taking its total store additions to 20 in the first nine months of the current financial year.

My take

Company seems to be growing strength to strength with scale. It’s negotiating power with brands has increased tremendously and it continues to be extremely intelligent about product selection, private labeling, store locations & layout.

DMart enjoys strong customer loyalty and over the years has also been able to dramatically improve its customer positioning.

Management is gradually becoming aggressive about growth but not to the level where it raises alarm. It seems to have cracked the operational model very well and now seems to be ready to push the pedal a little more.

For DMart, my only and only concern continues to remain around competition – Amazon and Reliance. Had also highlighted the same in my DMart note in July 2019. So far nothing of that has played out.

Competition continues to experiment but success of those remain to be seen. Fact remains… grocery retailing seems easy but is the most difficult business to execute !

The fact that DMart has been able to execute this is what makes DMart… THE DMART

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About the author

Nitin Jain

A finance professional with around 20 years of investing experience in Indian markets both on buy and sell side, equity and debt, private and public with some of the best organizations globally including Goldman Sachs, ICICI Group, ICRA and others. He is a All India Silver Medalist CA by qualification.

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