Dmart for long term investors

Top 5 Reasons To Buy Dmart For Long Term

If you don’t know Dmart then you are either from outside of India or you have never gone shopping. It is a supermarket chain founded by Radhakishan Damani in 2002. Before starting dmart he was a well-known long-term value investor.

The sound knowledge of investing helped Damani to understand consumer behavior and its pain points. The business model of Walmart, the American retail company, inspired him a lot which later leads to the birth of Dmart in Mumbai.

Damani used to be a well-known value investor in 90’s so he believed that profitability and scalability are the backbones of a good business. The business model of Dmart is primarily inspired by the investing philosophy of its founder.

Business Model of Dmart

  • If you ever visit dmart then you will find that it keeps its store simple. You will never find dmart at malls, or at other expensive places because It gives special attention to the cost-cutting which comes from its founder’s philosophy.
  • “Good Product and Great Value “ is the mantra of Dmart’s success. They focus on middle-class people(which consists of more than 50% population) and try to provide the product at the cheapest price in the market.
  • It follows the cluster-based expansion approach, the company increases its stores where it is already present instead of expanding in new regions. It helps Dmart to reduce transportation and logistic cost.
  • Dmart buys products from the company in the bulk and sold them immediately due to its large number of customers. So they get the best discount and hence they can sell the product at the cheapest rate than anyone else.

When other retail giants like big bazaar and Reliance retail are struggling to make money, dmart, on the other hand, seems to be a money-making machine.

Revenue Model Of Dmart

Dmart’s fundamental analysis for long-term investing

Particulars
2018


2019
202020212022
Sales15,03319,91624,67523,68730,352
Operating Profit1,353

1,633


2,128


1,745

2,502
OPM9%8%9%7%8%
EPS

12.92

14.4620.0916.97
23.04
Net Profit
806
9031,3011,0991,493
  • Dmart has very little or zero debt so it doesn’t need to pay interest on its debt. Whole profits are invested back into its business.
  • The company has given stellar 25% profit growth and 21% sales growth in the last 5 years.
  • The promoter holding is 74.99% which shows the confidence of the management in the company’s business.

Future Prospects of Dmart

It opened 50 new stores in FY 21-22 in spite of the covid fear in the market. It took Dmart 10 years to start its first 8 stores. Money was not an issue but Damani believed that business and investing is a game of patience.

Also, Read Our blog on Investing tips for a students.

Due to this strategy, Dmart hasn’t closed a single store to date and its keep opening stores in different part of the country.

Dmart is facing stiff competition from E-commerce sites like Amazon, and Zepto. so, they have also started their own e-commerce platform called as avenue eCommerce.

Today his patience is handsomely paying its dividends as last year it opened 50 new stores in spite of lockdown and fear of a third wave.

Dmart share price

Dmart has given more than 500% returns to its shareholders. It has handsomely benefitted those who hold Dmart for the long term. Currently, it is trading at the level of 4,300. The Russia-Ukraine tension leads this stock to a correction of more than 20%, so it can be a good buying opportunity.

Dmart share price target

Morgan Stanley is bullish on the Dmart share price and has set a target of Rs 4,332. The recent quarter shows strong demand so their revenue also shot up by 19%.

Kotak Institutional Equities has increased its target to Rs 3,530 from Rs 3,300 earlier.

Jm Financial is bullish on the dmart share price due to an increase in the margin in the recent quarter. They set a price target of Rs 4,330.

In Closing

I hope you know about Dmart a bit more now. Do comment if you have any doubts related to the Dmart stock. Happy Investing!

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