Avenue Supermart Ltd. (DMART) - "No-brainer" stock in retail sector

By -


          Everyone known about Rakesh Jhunjhunwala, one of the successful investor of India as well as Warren Buffet of India. But who was his guru?.... His guru was Radhakishan Damani. He had a vision that other investors should invest their money in his company. So he started a supermarket business under the name of DMART.
        
          DMART is a chain of supermarket in India founded by Radhakishan Damani in the year 2002. It is promoted by Avenue Supermart Ltd. It has more than 196 stores across 11 states in India. Dmart is known as WALMART of India.

BUSINESS STRATEGY:
  • Focus: They focus in giving discount to consumer. It means low price strategy.
  • Self-Owned Stores: They always buy their own property. They don't focus on rented property. This helps them in reducing cost of product.
  • Control Expense on marketing and shopping mall: You will never interact with big hoarding or digital marketing of Dmart. Their stores are based on low-interior-cost concept.
  • Cash Discount: Since their payment to supplier is very fast so they get a cash discount. And some portion of this discount is transfer to customer as a discounted rate.   
  • Trade Discount: They focus on bulk purchasing and bulk selling. So they get trade discount on purchasing huge quantity from a supplier.   
  • Slotting Fee: It is fee charged to supplier by Dmart in order to have their product placed on their shelves.. This fee help them in passing discount to customer.
  • Positioning Fee: Many supplier are charged to place their product on the eye level so that they get more sales. 
  • Regional Goods: Since India is diversified country, so Dmart believe in selling area-specific products.
  • Selling Self-Own Branded Products: They study about most selling product of their store and start manufacturing by themselves in order to get better pricing. Dmart Minimax, Dmart Premia, etc are some of the self own brands.        
        Above all strategies makes Dmart different from all other retail chain. Thus, it has been a successful business. 


FUNDAMENTAL ANALYSIS:

  • Topline / Sales growth: The revenue of the company is growing at the yearly rate of 33.68%. 
  • Bottomline / PAT (Profit after tax) growth: The PAT of the company is consistently growing at the yearly rate of 40.91%.
  • EBITDA (Earning before interest, tax, depreciation and amortization): It is growing at the rate of 23% Y-o-Y.
  • Debt to equity ratio: It is 0.13. It means company is virtually debt free. Interest payment are well covered by EBIT.
  • ROE (Return On equity): The average ROE of 5 years is 18.56%. It means management of the company is good as effectively using companies asset to create profit.
  • Current Ratio: It is 1.61 which means companies liquidity position is healthy.
  • P/E (Price to earning) & P/B (Price to book value ) ratio: Both these ratio are very high as compared to industrial P/E ratio and P/B ratio respectively. Thus, it is very expensive.
  • Promoter & FIIs holding: Current promoter holding is 74.99% which is consider to be best. FIIs holding are increasing from last 3 quarters. Mutual fund holding are also increasing. No pledging of shares by promoter.
  • Dividend: Company has never paid dividend to the shareholder in last 5 years.


MY PERSONAL VIEW:

          I would say Dmart is one of the blue chip company. worth to be invested in. I have invested 30% of my equity fund on it. Although it is overvalued but I think its price will boom in near future because of its excellent earning, great business model, good promoter and growing faster than their peers. 


Comments

Post a Comment

Contact Form

Name

Email *

Message *

Popular posts from this blog

How to choose best mutual fund to invest?

By -
Image
          The Mutual Fund (MF) Industry's asset under management (AUM) has grown more than 2 fold increase in a span of 5 years, from ₹ 11.86 Lakh Crore as on 30th April, 2015 to ₹ 23.93 Lakh Crore as on 30th April, 2020. Currently, less than 6% people are investing in mutual fund in India. As per growing number of accounts in MF industry, it is been excepted that more than 25% people will invest in mutual fund in coming years.           In one of my post I have written about mutual fund, its different types, you should invest in it or not, how to invest in it and my personal view on mutual fund. Before reading this blog I would say gain some basic knowledge about Mutual fund from the previous post: Mutual funds are good or bad ? ➤ Factors for selecting mutual fund category (Equity MF, Debt MF or Hybrid MF): Before selecting any mutual fund scheme you need to choose mutual fund category.  Investment Objective: It refers to investors financial goal which he aims to accomplish with
Read more

Mutual Funds are good or bad?

By -
Image
          Recently, Franklin Templeton India's 6 debt fund closure was a shock to the investor as well as made them concerned about their mutual fund investment. This chaos has created fear in the mind of investor that  is investing in mutual fund are safe? Thus, in this blog, I would tell you what is mutual fund in short, its safe or risky, basic types of mutual fund, their benefits and  most important you should invest in it or not            Mutual Fund is a professionally managed fund which pools money from investor to invest in different securities such as stocks, bonds, etc. on a nominal fee. In simple words, your money and other investors money are collectively invested by professional in different assets to earn maximum return. ➤ Is Mutual Funds are Safe or Risky ?           Well, I would like to tell you that all Mutual funds are safe because three governing body of government are involved in it. Securities and Exchange Boards of India (SEBI): It   reg
Read more

4 Best Government's Saving Schemes

By -
Image
          Just think you have a safe deposit box where you keep a side a part of your income or saving amount and earn interest on it. Yes, it is government saving scheme.                        Government saving scheme are launched to strengthen the financial stability of the people. All the schemes are known for their long term benefit as well as tax exemption . These schemes are consider to be safe and secure.   In this post, I have choosen  4 best schemes which I think are good to invest in.  1. PUBLIC PROVIDENT FUND (PPF)                        It is a long term investment with the objective to mobilize small saving in a form of investment, coupled with a return on it. It is also called saving-cum-tax saving investment. Eligibility:  Any Indian citizen can invest in PPF. NRIs and HUFs are not eligible. One citizen can open one PPF account only. Rate of interest: Currently it is 7.1% p.a . It is revised every quarter. Interest in PPF account is calculated monthly on the lowest bal
Read more

Gold Investment - Safest & Oldest Investment of India

By -
Image
          In India, gold is considered as a valuable asset for society in terms of jewelry consumption as well as wealth accumulation by large number of low and middle class people. Throughout history, gold has been seen as valuable commodity. Therefore, gold is considered as a tool for financial planning.          People often ask me why to invest in gold rather than other investment strategies . I would give you undoubted answer : It has maintain its value over time. It has been proven hedge against inflation. Gold investment has minimum risk. Inflation and deflation does not have much impact on gold. It is simple and easy to liquidate. It can be exchanged for cash. It is key to diversified portfolio. Gold has historically negative correlation with stock.  Now, I would tell you the 6 different ways to invest in gold. 1.  JEWELRY  :            It is the oldest way of investing in gold. You can buy it from jewelry shop. If you want self satisfaction than
Read more