The increase in revenue was 18.1%, resulting in a 19.0% compound annual growth rate. The sales density has remained poor in comparison to the level it was at before the pandemic (about INR34.2k/sq ft in Q1FY24 as opposed to INR36.7k/sq ft in Q1FY20; comparable). Lower discretionary spending in comparison to levels seen before the pandemic kept underlying profitability and unit economics in a poor state. On the other hand, the contribution of general merchandise was heading towards levels seen before the pandemic. As a result, gross margin pressures continued (14.6%, -125bps YoY; vs. HSIE: 15.0%), and EBITDAM decreased -133bps YoY to 8.9% (HSIE: 9.0%). The discipline with regard to both costs and the deployment of capital has not been compromised.

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Outlook

We take into account reduced sales density and GMs and retain SELL by lowering our EPS projections by 5% for FY24 and 3% for FY25/26, with a DCF-based TP of INR3,200/sh, meaning 55x Sep-25 P/E.

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Avenue Supermarts – 17 -07 – 2023 – hdfc

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