DMart Parent Avenue Supermarts Reports Mixed Q2 Results: Revenue Up 16%, Profit Growth Modest

Avenue Supermarts DMart , the parent company of retail chain DMart, has reported mixed financial results for the second quarter. The company saw significant revenue growth but experienced pressure on margins and modest profit growth.

Financial Highlights

Metric	Q2 (Current Year)	Q2 (Previous Year)	YoY Change
Net Profit	₹6.85 billion	₹6.60 billion	+3.80%
Revenue	₹166.76 billion	₹144.38 billion	+15.50%
EBITDA	₹12.10 billion	₹10.90 billion	+11.00%
EBITDA Margin	7.30%	7.60%	-30 bps

Key Takeaways

Revenue Growth: Avenue Supermarts reported a 15.50% year-on-year increase in revenue, reaching ₹166.76 billion.
Profit Growth: The company's consolidated net profit saw a modest increase of 3.80% year-over-year, reaching ₹6.85 billion.
EBITDA Performance: Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) grew by 11.00%, from ₹10.90 billion to ₹12.10 billion.
Margin Pressure: The EBITDA margin declined by 30 basis points, dropping from 7.60% to 7.30%.
Operational Metrics: Revenue per store increased by 1%, while bill cuts rose by 14%.
Business Mix: The company's revenue mix remained stable with Foods at 57% and Non-Foods at 43%.
Geographic Presence: DMart shut operations in five cities and now operates in 19 cities.

Analyst Perspectives

HSBC maintained a 'Reduce' rating with a price target of ₹3,700, citing elevated operating expenses and the decline in EBITDA margin.
Morgan Stanley kept an 'Equal-Weight' rating with a ₹4,552 target, describing the quarter as a 'miss' with results 7% and 14% below estimates for EBITDA and PAT respectively.
Like-for-like growth moderated to 6.80%, marking a 10-quarter low.

Market Response

Shares of Avenue Supermarts closed 0.53% higher at ₹4,328 and have gained 22% year-to-date.

The financial results indicate that Avenue Supermarts has maintained its growth trajectory in terms of revenue, but faces challenges in profit growth and margin maintenance. The company's ability to increase its top line by 15.50% suggests strong sales performance, possibly driven by new store additions and increased footfall. However, the slower growth in net profit compared to revenue might indicate increased operational costs or competitive pressures affecting profitability.

The decline in EBITDA margin, although marginal, may warrant attention from investors and analysts. It could potentially reflect challenges in maintaining operational efficiency or increased expenses in the face of rapid revenue growth. The closure of operations in five cities also suggests a strategic realignment of the company's geographic presence.

As Avenue Supermarts continues to navigate the retail landscape, these results provide insights into its financial health and operational performance. Investors and market watchers will likely keep a close eye on how the company manages its growth, profitability, and expansion strategies in the coming quarters.

1 Day	5 Days	1 Month	6 Months	1 Year	5 Years
+1.29%	-0.81%	-8.42%	+1.11%	+1.58%	+115.38%

Avenue Supermarts DMart , popularly known as DMart, has reported a robust 15% year-on-year growth in revenue for the second quarter. The retail giant's financial results, approved by its Board of Directors on October 11, showcase steady growth amid a competitive retail landscape.

Financial Highlights

DMart's performance for Q2 (ended September 30) demonstrates resilience and continued expansion:

Particulars (₹ in crores)	Q2 Current	Q2 Previous	YoY Change
Revenue from Operations	16,218.79	14,050.32	15.4%
Net Profit After Tax	746.55	710.37	5.1%
Basic EPS (₹)	11.47	10.92	5.0%

Revenue Growth and Profitability

The company's revenue from operations surged to ₹16,218.79 crores, marking a significant increase from ₹14,050.32 crores in the same quarter last year. This 15.4% growth reflects DMart's strong market position and effective expansion strategies.

Net profit after tax reached ₹746.55 crores, up from ₹710.37 crores in the previous year's quarter, representing a 5.1% increase. While profit growth was more modest compared to revenue growth, it still indicates the company's ability to maintain profitability in a challenging retail environment.

Half-Year Performance

For the first half, DMart reported:

Revenue growth of 15.8%, reaching ₹32,150.91 crores compared to ₹27,762.19 crores in the previous year's first half.
Net profit increase of 3.5% to ₹1,576.28 crores from ₹1,522.82 crores year-on-year.

Operational Efficiency

The operating margin for Q2 stood at 7.58%, slightly lower than the 7.87% reported in the same period last year. This marginal decrease might be attributed to increased operational costs or competitive pricing strategies.

Commercial Paper Issuance

In a move to optimize its financial structure, DMart issued commercial papers worth ₹100 crores on September 29. These papers come with a 6% discount rate and are set to mature on December 29, providing the company with short-term liquidity.

Market Position and Outlook

DMart's consistent revenue growth underscores its strong market position in the Indian retail sector. The company's ability to increase sales while maintaining profitability, albeit at a slower pace, suggests effective cost management and operational efficiency.

As DMart continues its expansion strategy, investors and market watchers will be keen to observe how the company balances growth with profitability in the coming quarters, especially in light of evolving consumer behaviors and potential economic challenges.

The retail giant's performance in the first half sets a positive tone for the rest of the fiscal year, with expectations of continued growth and strategic market positioning.