Buy Electronics Mart; target of Rs 141: LKP Research

LKP Research's research report on Electronics Mart

Electronics Mart (EMIL) had a strong quarter despite a curtailed summer better than expected. Revenues were up 20% YoY for Q1FY24. Q1 being a seasonally strong quarter for larger appliance category (contributed 49% to sales) like coolers and AC in particular have grown 30% YoY despite curtailed summer due to rains in the North while it remained better in Southern India. Management expects Delhi / NCR stores to achieve break even by the financial year end as the demand trend remains positive across the segments it caters and remains on track. It contributed ₹~750 bn across the 13 stores operating in Delhi/NCR region. SSG stood at 13.6% for Q1FY24. Margins during Q1FY24 stood at 7.7% (+80bps YoY) largely contributed due to sales of higher margins ACs as fixed cost remained in line with expectation. Management reiterated its margin guidance to be in the range of 6.5% to 7% with revenues growing at ~20% YoY. PAT in Q1FY24 was up 48% YoY. 6 new stores were added during Q1FY24 across the regions and we expect 23-25 stores by next financial year. Management highlighted that the scope to expand around the Delhi/ NCR remains quite large with adjoining areas providing ample opportunities.

Outlook

The company valuations have been reasonable compared to competition and we maintain Buy on the stock with a revised PT of ₹141.