FinShiksha - What makes DMart special?
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- čas přidán 25. 07. 2024
- DMart is one of the most followed stocks in the Indian Stock Market. The stock has gone up nearly 14 times from its IPO price, and continues to command a massive premium in its valuations.
What makes it so special?
We try and decode its business model in this video. What makes it special is
- Huge growth opportunity - DMart today operates nearly 250 stores with 9 million square feet area under operation. This could easily go up 4 times in the next decade. The growth opportunity in the space is immense
- Solid Inventory Management - In retail, most of the purchase is on impulse, at that moment. Bad inventory management would either mean lost sales, or obsolete products. This is even more relevant for perishable products like food, where bad inventory management could result in complete loss of value itself. A firm that can revolve its inventory in 28 days, will have an inventory turnover of 12-13 times a year. A retail business thrives on fast moving inventory and gross margin you make every time the inventory is sold.
DMart is the boss in this! There are very few other retail firms that show these kind of numbers. It explains that DMart understands its customers, their needs, and their purchase cycles. It seems simple, but this is a killer competitive advantage in a business that runs on thin margins and is highly competitive!
All this makes DMart a business that can generate nearly 1.5 lakh crore in sales and Rs 5000-7500 crore of net profit in 10-12 years from now.
We have written a short blog post around the same, which can be found here
finshiksha.com/dmart-valuatio...
Disclaimer: This is not a recommendation to buy or sell any security. The video is only for educational purposes.
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Thank you so much! Wonderfully explained! Hoping to get more such videos from you..
Dmart is best❤
Brilliant video
Thanks! Please do share with your network!
Great Job sir. I was looking for some starters in the retail sector. This was of great help.
Great to hear!
Thankyou for your presentation. I agree that DMART is a well-managed company and has great growth potential. But don't you think the current Market Valuation of 2.65L CR is something that is difficult to justify?
Can't exactly comment on valuations. If you take a longer term view, and the company is able to achieve nearly 7-8K crore in profits in say a decade, maybe there is still a road for growth. May not be the company that gives the highest returns, but may be a stable compounder... Valuations may be rich in near term, but then most well managed companies in high growth industries with stable business models trade at premium valuations in India.
Sir make few videos on how to do forensic accounting on the basis of accounting notes in annual report of a company.
Sure. We will try to add those as well.
whats bill cut?
The bills generated when the customer purchases something
I've heard that DMART, instead of renting their stores chooses to outrightly purchase the land for its stores. Don't you think this strategy will effect their net cash flow and therefore at least for the medium term they won't be able to pay any dividends?
A store typically costs Rs 40 crore to setup for DMart. With profits around Rs 1500 crore, they can easily set up nearly 30-40 new stores each year. They can also easily do so with some equity raising. With such growth, they would rather reinvest everything. Don't think they will pay dividends, but that is a good thing if the company is growing..