JM Financial's research report on Avenue Supermarts
DMart��s 4QFY18 profitability is a tad below the kind of trajectory that one has come to expect from the company, and that was in part due to the accelerated store-additions that happened during the quarter - 14 new stores were added vs past 6M��s run-rate of 4-5 per quarter. This likely caused a higher than expected rise in 4Q��s SG&A and some adverse impact on mix. Revenue growth is on expected lines �� 22.5% on reported basis which, as per our workings, translates to an intrinsic growth of 27-28%. Reported LTL growth for FY18 is a modest 14.2% which again, in our view, has the impact of GST-related changes ex which LTL for the fiscal would have been c.18%. LT story is intact; 14 new stores in 4Q take FY18��s total to 24 - reflecting a slightly higher pace vs that achieved in the last 2 years �� this should allay concerns on DMart��s ability to find new locations for store rollouts, in our view.
Outlook
We remain bullish; any weakness in stock price should be used as an opportunity to add positions in what we believe to be a best-in-class cashflow-backed earning-compounder.
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