Yes, greater than 100 PE certainly makes the investment rationale shaky, however this has some fundamental reasons which is attracting the smart money.
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Huge opportunity for growth. It reached 1million plus population cities as of now. The growth in urbanisation and employment(more workforce)% will also help in getting more numbers.
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Operational efficiencies are one of the best in off-line retail if not the best. After sometime, the inefficient ones will make way for efficient ones.
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The promoter is one of the most successful investor in India and infact comes under good promoter. The return ratios and financial viability etc will be checked. Mr Radhakishan Damani would have easily started the franchise model to give a spurt in growth figures in short term but then he understands long-term and so never considered the franchise model.
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Dmart is a platform/toll bridge kind of business. They will have to spend less for capex and also once they master the volume game there is network effect. Once the company’s growth gets saturated, the further growth comes from making in-house products. There is no end for in-house products. Batteries to medicines to chips etc
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Great balance sheet with no debt which is different from many other growth chasing retailers
Long-term investment - The base for long term investment is certainty. The question to ask here is , how sure you are whether Dmart can sustain for next 10/20/30 years. Under a good promoter(great investor) whose majority of wealth gets created by growth in this company, I think this makes the market give it a longer rope.
Discl - Third largest holding in my portfolio