Several brokerages have estimated Dmart’s Earnings Per Share (EPS) to go down by up to 20 per cent for the financial year 2020. The ESP of Dmart has been lowered down by these brokerages considering the upcoming challenges which have to be faced by the company due to social distancing and restricted store timings which can further impact its business recovery in brick-and-mortar stores.
Under lockdown restrictions on sales of non-essential items, the company has missed analyst estimates in the fourth quarter of Financial Year 2020. This has happened for the first time since the listing of the company in March 2017. Considering the latest results, to show a greater than expected margin impact, many analysts have decreased its ESP to up to 20 per cent.
Prabhudas Lilladher, one of the brokers who estimated ESP of Dmart, said in a note, “We are cutting FY21 and FY22 earnings per share (EPS) estimates by 16.8 per cent and 8.1 per cent, respectively, due to lockdown’s impact on sales, higher cost of operations and delay in store openings and safety costs”.
While Dmart ESP has gone down, its parent company, Avenue’s share has increased by 30 per cent this year. On Friday, its value was Rs 2,403 at closing.
IDBI Capital said, “The company has reported a 23 per cent increase in sales to 6,190 crores and 41 per cent rise in net profit to 287 crores in March 2020 compared to the same period a year ago. Operating profit margins contracted due to higher discounting and revenue loss in high-margin-accretive general merchandise and apparel business during the lockdown in March. Absenteeism of staff due to Covid-19 is a major cause of concern. DMart rolled out incentive (hardship allowance) and safety-driven measures to win back employees”.
According to Analysts, in March, the company had raised 4,000 crores through qualified institutional placement. This has bolstered the balance sheet of the company and helped it reach the current net cash position of 3,240 crores, improving its liquidity position in uncertain times like Covid-19 situation.
Motilal Oswal Financial Services said, “DMart is well-positioned in terms of the business model and balance sheet to recover from the turmoil in the economic environment. This is as it caters to a large proportion of low-ticket items and has a strong balance sheet. We cut our Financial Year 2021 operating profits by 17 per cent, but retain our estimates for Financial Year 2021”.