Avenue Supermart: a compounding machine?


(Dinesh Sairam) #1041

(ravish) #1042

Dmart should also open large store formats which have large parking and i think it wont be impossible for them do some few hundred crores of sales per year from those stores. Also i dont know how their franchise models works? If it works on commission or royalty basis then again the profit would increase on its expansion without any balance sheet load. I read today only how much revenue Ola and Uber are having yearly and it was very disappointing for me to see only 1500 crore and 500 crore is clocked by them and the money they are spending or say loosing is huge. Their model is perfect for Metro cities but wont be profitable in other cities. In case of Dmart even a District and Taluka level can give revenue more than lakh crore despite all the current sellers doing business. I have seen how a taluka place is changing in terms of packaged foods, just start from Flour,spices, surf, tea and many day to day items. Market is very huge and is expanding more than ever but how will they tap this Taluka size market will be a key to their growth. I hear from one of my friends Dmart is looking for place in talukas. Damani is outstanding is very though full of what he is doing and one should also notice than he is a outstanding Investor which sets him apart from other businessman as he knows better about a profitable business sense. My take on current situation is very basic it is not giving any margin of safety and the results it has given also creates short term doubt. It is better to watch is and jump with all guns blazing when a significant correction in price.
Discl: No holding.


(Ranga Kiran) #1043

(Abhinav Mehrotra) #1044

A very balanced article articulating all the reasons why and why not online grocery shopping works/will work. Great to see that India has one of the ingredients needed to make this work.


(Abhishek Jain) #1045

Beautiful article indeed.
But demographics are different- US and India; while the population density in Indian cities is much higher than the US, at the same time logistics and supply chain is equally horrible.
Indian online grocery market is still in a very nascent stage and with FDI compliance rules, firms thinking about profitability, it will be much more difficult to sustain the online grocery model.
In my opinion, the main driving force to buy grocery online is the discounts given by players.Once it dries down, it will be difficult for these players to sustain.Indians prefer buying grocery after touch and feel.
Recently,paytm mall whose major source of revenue was grocery section, suffered a decline of almost 80% in sales, the moment they stopped cashback/discounts. Given the number of players available as alternatives(big basket,amazon now,flipkart,grofers), it did not even take customer a month to switch loyalities- such is the bad market; till the time you are providing discount and freebies I am with you :slightly_smiling_face:


(mrai74) #1046

The initial news of Reliance Retail going public is in air & it may lead to valuation check for our company. Let us see how it pans out in next 1-2 quarters


(dumboinvestor) #1047

Issue there is no company growing fast in a non cyclical space generating high returns on capital with some moderate pricing power and quality mgmt in India. There were two (Page and Dmart) now there is only as Page did not live up up to its lofty valuation. It fell close to 50%. The same will happen with Dmart once its growth stops or it compromises on other things to fuel growth. It already got into the leasing model since buying and building is not as scalable. So they are doing everything to maintain growth and hence valuation. It is too expensive at 100x it will be too expensive at 70x and 50x. I think these companies will derate swiftyly and then time correct. Dmart share holders should be worried. You cannot pay 100x for a business not growing at 30% cagr. And Dmart cannot grow at the price for a long time anyway without raising capital. It generates 23% roce. It cannot grow above 20% max. Promoter has enough money and he sold at far lower levels. And he is not buying dmart at the moment.


(mrai74) #1048

There has been enough talk on expensive valuation & the debate continues as few claim expensive and sit out for right time while other set of investors find it worth & keep on investing even at current levels. I don’t see an end to this debate… atleast in near future

Coming to page … the debate of high valuation continued for almost a decade & again few kept on waiting… repenting & others made money.

Back to Dmart… people who haven’t bought shouldn’t be worried as they are safe & people holding are well aware of open discussion on high valuation. Why are we expecting Promoter’s to buy, when they are restricted to bring down their holding as a regulatory measure. Promoter had sold due to that & NOT to encash the claimed high valuation.


(Bheeshma Sanghani, PhD) #1049

in 2018 , the total rent was 0.32% of the topline i.e 47.58 cr rent on 15008.89 cr. Once 2019 AR is published we shall know how much the % has increased by. Note no 36 on page 131 of the 2018 AR has all the details. ~230 cr are the non cancellable future rental committments as on 2018.


(Vishal Bharti) #1050

Just FYI, remember we also have companies in unlisted space like FlipKart, Ola, Zomato, Swigging etc…being bought at super-nice valuations by investors… where the earnings have not even come in yet!. these companies are in big losses…so its not to do with trailing earnings only always…100PE may be trailing basis, markets value based on future earnings. While the “how much” part is uncertain as of now…Dmart has the displayed the best potential and execution to capture this market…and which has a long run way.


(Yatharth) #1052

I personally do not know if Dmart can make good profits or not, but evaluating a company on PE alone may not be a great idea. The debate should be on future profits than on PE multiples.

See a number of posts comparing Dmart and Page and how Page bubble burst. However, many do not talk of Titan now.
First time friends on this forum started questioning Page Industries’s valuation was Sep 12 when it was at ~38 PE. By 2014 many senior ones started exiting. Now Page Returns CAGR since then varies from 24% to 35% even after this downfall (7 years to 2 years). Those who exited, including me, could not get portfolio returns like that since then.


(Rahul) #1053

I see lots of mid-level managers in D-Mart selling their shares.
https://www.bseindia.com/corporates/Insider_Trading_new.aspx

Though books suggest to not read too much into selling of shares by the management. If too many employees are selling shares frequently in the market, it can be a red flag.

Don’t think so many employees would be buying house at the same time :smiley:


(Divyanshu Bagga) #1054

One reason for selling could be profit booking motive. Dmart shares have appreciated considerably, especially for those who have been holding shares since IPO. One should be worried if the selling persists even with steep fall in price because that indicates the knowledge of something worse with insiders; not this case.


#1055

It could also be a sign of impending rise in attrition. Retail is a hot sector and these folks would be easy poaching target.


(mrai74) #1056

If we analyse the available details for last year or so, we can’t find even a single week when employees have not sold it.


(mrai74) #1057

Another FY is about to end & time to evaluate investment decisions. Although we will get more details with annual result, one key factor contributing to growth is dependent on no of stores.

As on 26th of March 2019, D’mart has 173 stores across India.

24 stores were added in the FY18

20 stores were added in the FY19**

New store opening is on expected lines & top line must reflect this in coming weeks.


#1059

How you come to know 20 stores opened in FY19? DMART declared they opened 10 stores till Q3…Any news link?


(Ranga Kiran) #1060

This week, a new store was opened near to my place in Hyderabad.


(Bheeshma Sanghani, PhD) #1061

So far Dmart has 172 stores distributed as under

image

The major additions have been in Maharashtra and some in Hyderabad. If this remains the store count, 17 stores would have been added in 2019

Source : https://www.dmartindia.com/feedback

Best
Bheeshma


(mrai74) #1062