Why Avenue Supermarts (D-mart) Stock fell with Q3 Fy 18-19 Results

Hi,

Today we will discuss the fall in the stock price of D-Mart due to the Q3 of financial year 2018-19 results of the company.

First one must know that D-mart was trading at a very high PE ratio of above 100. Therefore it needs a very good growth results to sustain such a high valuation.

So let's compare the sales, operating profit and net profit declared by the company this year with the same quarter of the last year - 2017.

Dec 2017
Sales - 4094 crores.
Operating Profit - 422 crores.
Net Profit - 252 Crores

Dec 2018
Sales- 5451 crores. (33% growth)
Operating Profit- 453 Crores (7.5% growth)
Net Profit - 257 Crores ( 2% growth)

So if we look at the total sales growth, it is similar to the previous years, but the operating profit and net peofit growth is very less as compared with the previous growth record of the company. They also used to be 30-40%, and this is the main reason that stock peice fell today i.e. on 14th January 2018, by more than about 10%.

Now let's look at the most probable reasons for the slower growth rates of the profits. The increased competition from the online retail stores, Big Bazaar, and Reliance retail may have forced them for the price cuts.

Also D-mart believes is owning the real estate on which these stores stand, so the interest payments are also a bug big factor.

Thanks!