Avenue Supermart: a compounding machine?


(Peabody) #535

Too many judgements on DMART’s future.It just shows how naive we are.Not recommending to buy or sell but a well oiled engine like DMART will not disappoint in IMHO.

disc: not invested now


(saumya) #536

why we investors want to tag everything as either White(Great company) or black(Bad company)
Their are other grey options too like great company bad/high valuations(Dmart Bajaj finance) or bad companies great valuations(PSU bank type).


(LTInvestor) #537

There is no money for debating, but just to note that Dilip Build has a very positive OCF which is spent on its BOT subs. DMART also has positive OCF which is spent on expansion. Only diff DBL trades at 14x-15x, DMART at 100x.

No one makes on EPS/CF, its all the narrative. Current narrative is consumer. It will turn and then holding a 100x purchase will bite.

Note: Was never a fan of DBL, though at current prices it is a steal.


(maninder.nitw) #538

Be married with 2 kids … things will change automatically …when you will have to think about every penny spend …unless u r rich…in that case dmart is anyways not for u … it’s for great indian middle class :slight_smile:


(bharat19) #539

Reminds me much of ITC Choupal Sagar Rural Chain and DCM’s Hariyali Kisan Bazar days ! Both started brilliantly , expanded aggressively but failed in the end…!
DMart , a little different approach , but have to see how far it will go !
It is trading at a discounted earnings of 20PE FY 2023 considering that PAT grows 50% YoY from here without any equity dilution.

I am 22. No plans of Marriage right now but even after 4-5 years when i will be married , there is no hope that DMart will have it’s store in my district. Anyway Good luck


#540

A d’mart is near my home (<2km) but I hardly go there. I will tell you how to beat d’mart prices for most of the month. BigBasket has an ongoing offer of 20% cashback on Citi Cards for the first 5 days of the month. We use two cards on 1st and 5th of the month to stock up except veggies. I save on fuel cost, save at least 1-2 hrs of time which is more valuable for me and avoid lots of pushing and shoving during the billing time. I have a feeling that BigBasket will be a survivor in the online space.

Disc : No holding as of now


(Vishal Bharti) #541

What if after say 1 year this Citi scheme(or other eCommerce dole outs) stop?will you continue to be with BB(or other e-commerce companies)? or will you also look for other options like DMART?


(phreak) #542

I think this thread is being cluttered with the soft-side of business which is very subjective. While Bigbasket does offer some good deals from time to time for the customer, as a business it is piling up losses both at the wholesale and at the retail level (they file separately) at a rate proportional to its growth which means that they still have not cracked the supply-chain.

D-Mart is a brilliant business whose moat is its supply-chain management - the way they maintain their inventory, pay their suppliers on time, get the best prices from the suppliers, ensure quality, pass on the gains to the customer wherever they can and so on. They have great consistency in debtor days, inventory turnover and other return ratios which are enviable in the retail business and they can sustain this growth for a while via internal accruals and some responsible debt if necessary.

Comparing this with cash guzzling businesses that are yet to turn profitable and spelling doom is imprudent - perhaps only someone who has never stepped into a d-mart can write such a premature obituary. I think online grocery shopping via Amazon pantry and Bigbasket may have a niche in tech-savvy shoppers who shop with a list. For the others who can’t care less about poking at the pixels and like to walk the aisles and browse to find what they need, compare the options, touch and feel the product before buying, brick and mortar retail isn’t going away in India at least, anytime soon. A look at the section of the populace that shops in d-mart would affirm this.

With all that said, it isn’t in my blood to pay the valuation it demands.


(rskothari) #543

D’mart have good billing system as compared to other retailers.

Disc: No holding


(Rahul B) #544

Here are the things I observed:-

  1. Dmart prices are lower than Amazon and bigbasket (except credit card offers). Amazon and BB are losing money. It’s like uber and ola in the initial days. After somedays, they will look for profitability.
  2. Amazon and BB are competing with local stores. Local stores are facing lot of heat with Amazon, bb, more, reliance fresh and dmart.
  3. The spending by Amazon and BB will help the big stores like dmart. Because the local stores are going away. In Hyderabad, even in small streets also, more is opening outlets in rented places which will increase their real estate cost. But dmart is not having much real estate cost. It can sustain for years.
  4. Valuation of dmart is very high. The stock price will come down or it will stay at this level only for years if there is no big growth.

Disc : invested at higher levels.


(Bheeshma Sanghani) #548

Currently, in my view , the market has priced dmart to deliver an ROE of ~25% going forward.

In the last 3 years - Dmart has delivered an incremental ROE b/w 34% to 37%

image

Given this past record, this is in the realm of possibility and if this record is maintained it may surpass 25% in the coming years too. Ofc all these are projections and extrapolations of past into the future and it may not unfold like that so thats a risk.

I think one should consider these stellar numbers and factor them into valuations.

The basic thesis is that here we have a business which has demonstrably redeployed shareholder capital at 35% return yoy in the past and there is a strong likelihood that it can do so in the future. It may not be 35% or anything like that but to me 25%-30% doesnt look out of line at this point

Best
Bheeshma


(RamanTiwari) #549

Another stellar number is: After owning the store- to generate 100 crore of sales they need only 5 crore of capital. Competition needs at least 40-50crore capital for 100crore sales.

On customer side, existing customers keep repeating and new additions keep happening.
Market share is less than 0.5% - so huge opportunity ahead.

I see a HDFC Bank of early 2000s in this company, where Analysts would always feel it is overpriced but it will keep going up a few percentage points after results and stay expensive.


(Vivek) #550

For anyone who is planning to buy new into dmart should listen to Mr Rajeev , (listen from 15 minutes …) and understand well what you are paying at this rate.


(thecroc) #551

It isn’t that simple. According to Mr. Thakkar’s explanation, to get 20% return you need 5 PE stock (using the EP ratio theory) PPFAS mutual fund doesn’t own even one 5 pe stock and will only own one by chance when a financial crisis hits the world. So these talks are like hathi ke daat, for new folks who want to know the theory. And the theory of anything is good to have a reference , but the flight of practicality tells 5-10 PE is mostly crap or a cyclical in down cycle.


(thecroc) #552

One additional issue I have following Thakkar is their inclination to time the market and keeping cash in hand up to 25-30% . So if you too have or want to have a similar strategy, valuation by theory book is highly recommend, but again he holds Bajaj finance and Facebook etc which seem overvalued in theory as well. My point is there are no rules and those who preach the rules don’t follow themselves.


(thecroc) #553

Here is a challenge - can anyone show a Dmart location listed on google with less than 1000 google reviews and less than 4 star review?
Also Mr. Thakkar talks about competition. So lets find a single reliance store with 1000 google reviews and a 4 star review with that.
I feel its a matter of time DMart overtakes Reliance Retail in revenue. Profits , it might be ahead already:)


(KunalKothari) #554

Since Dmart has become one of the poster boys of over-valuation in this bull market, it would be great if someone (on the bull side) can post a DCF valuation that incorporates future dilution and assumes a realistic terminal value/exit multiple. We will know what numbers the business has to produce to be a worthy investment at CMP.


(Vivek) #555

You seems to have taken an opposite view personally, what I have clearly stated is that , those who are entering NOW atleast should know what they are actually buying. No one is telling D-mart is a bad business or a bad management . There is no need for a challenge to show you are correct or Mr Rajeev so just chill and if you are comfortable you buy let others hear out others views and take there own decisions.


(thecroc) #556

I still want someone to pursue the challenge, at least those invested. Is there value in customer happiness? Can we expect Mr. Thakkar to quantify it?
Customer happieness leads to longevity of growth.


(LTInvestor) #557

The overconfidence on DMART is overflowing!

I gave example of Dilip Buildcon (and got questioned by DMART believers), maybe Symphony is a better example. Rs. 2155 in Jan 2018 trading at 80x earnings. Someone left holding the bag! Stock price at 1000 now and still overvalued.

DMART has to show one quarter of slow growth and market will shave it off by 20%