ABM Equity has come out with its report on Avenue Supermarts Ltd. The research firm has recommended to "Subscribe " the IPO in its research report as on March 08 , 2017.
Avenue Supermarts Ltd (ASM), which operates the retail chain D Mart, is an organised retailer with wide range of product offerings across food, non-food, general merchandise and apparels. It opened its first store in 2002 in Mumbai
and has emerged as the second largest and the most profitable retailer in the country. It operates through 118 stores across 45 cities in 9 states and one union territory. Its stores are concentrated in west, central and south India with
50% stores in Maharashtra. Its revenue is also concentrated in Maharashtra (~58% of revenue). Its total retail business area is 3.57mn sft. with individual store size ranging from 10,000 sft to 60,000 sft. Its revenue per sft. has grown at a
CAGR of 18% over FY12- 9MFY17.
Avenue Supermarts Ltd’s (ASM) D Mart is second largest and the most profitable retailer in India. It opened its first store in Mumbai in 2002 and it has a total of 118 stores as of 31st January, 2017. It is present across 45 cities in 9 states and one union territory with majority of stores in Maharashtra (59). It has a retail business area of 3.57mn. sft. as of 31st December, 2016 with size of stores ranging from 10,000 sft. to 60,000 sft.. It predominantly operates on ownership model in most of the stores. ASM’s revenues have grown from `47bn.
D Mart has a proven track record of operational and financial efficiency since 2002. From a single store in Mumbai, it has emerged as the second largest and the most profitable retailer in the country. Its cluster based ownership model proved to be most successful model in the industry which the like of big corporate houses failed to employ. It has a history of no store closure in the last 10 years reflecting its store management efficiency. It enjoys 10% market share of the total organised retail industry. Its Revenue has grown at a CAGR of 40% over FY12-16 while its EBITDA and PAT has grown at a CAGR of 48% and 52% respectively.
At the higher end of the price band, D Mart is valued at 36x FY17 earnings, which is at a slight discount to its closest listed peer, Future Retail (38x). In EV/EBITDA terms it is valued at 19x FY17 EBITDA, which is at a discount of 33% to its closest peer Future Retail (25.5x). Given strong management team, trusted brand image, highest profitability profile in the industry, high return ratios and high growth opportunity, we believe it should command better valuations. We recommend SUBSCRIBE on Avenue Supermarts Ltd. (D Mart).
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