Avenue Supermarts Ltd. (ASL) is an emerging national supermarket chain, with a focus on value retailing. ASL opened its first store in Mumbai in 2002. As of January 31, 2017, ASL had 118 stores with Retail Business Area of 3.59 million sq.ft, located across 45 cities in Maharashtra, Gujarat, Telangana, Karnataka, Andhra Pradesh, Madhya Pradesh, Chattisgarh and NCR.ASL operate distribution centres and packing centres which form the backbone of their supply chain to support retail store network. As of January 31, 2017, ASL had 22 distribution centres and six packing centres in Maharashtra, Gujarat, Telangana and Karnataka.
- Value retailing to a well-defined target consumer base
- Steady footprint expansion using a distinct store acquisition strategy and ownership model
- High operating efficiency and lean cost structures through stringent inventory management using IT systems
Outlook & Valuation
Revenue of ASL has grown at a CAGR of 40% during FY12-16 compared to growth of 30% for V-mart, 28% for Trent and 20% for Future Consumer in the same period. PAT of ASL has grown at a CAGR of 52% during FY12-16 compared to growth of 27% for V-Mart and 7% for Trent in the same period. Higher revenue and net profit per square feet does give ASL an edge over its peers as the absence of rental costs helps the company deliver higher operating margins. RoNW for ASL stands at 23.4% in FY16 compared to 3.6% for Trent and 12.7% for V-Mart. Considering supernatural growth and significantly higher ROE, we believe ASL deserves premium over its peers. Trent and V-Mart are currently trading at 50.9x and 37x their FY17E EPS. At upper band of INR 299, ASL is valued at 36.1x its annualized EPS of FY17. We recommend SUBSCRIBE to the issue with long term perspective.
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SPA Securities was promoted by a team of finance professionals in 1995 with an objective to provide value added financial services. Initially, the Group focused as a niche financial solutions provider in corporate finance and wealth management to Indian companies and high net worth individuals. In January 2000, the Group expanded its operations and the range of services. Today, SPA provides services for securities broking, merchant banking, wealth management, financial advisory, corporate finance , risk management and insurance broking.
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