| A | B | C | D | E | F | G | H | I | J | K | L | M | N | O | P | Q | R | S | T | U | V | W | X | Y | Z | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
1 | Avenue Supermarts Limited | Opportunity Cost | 1 | 10 Years | USD | |||||||||||||||||||||
2 | Industry | Retail | Country | India | Reporting Currency | INR | Market Capitalization | ₹ 101,404.00 | Date of Valuation | 8/7/2018 | Financials | 2018-19 (Q1) | Company Beta | 2 | 15 Years | EUR | ||||||||||
3 | The Narratives | Industry Beta | 3 | 20 Years | JPY | |||||||||||||||||||||
4 | D-Mart needs no introduction in India, just as Walmart would need no introduction in the U.S. It is a 16-year old massive hypermarket chain which offers one-stop shop for groceries and other household items. It is owned and operated by its parent company Avenue Supermarts Limited. The most interesting thing about D-Mart, surely, is its founder Mr. Radhakrishnan Damani. He was a well-known investor in Indian equities, even before he built this successful retail empire. His business acumen is so well known that even Mr. Rakesh Jhunjhunwala cites Mr. Damani as his guru. Having had its IPO just last year, Mr. Damani is busy spending the IPO money on aggressive expansion. Couple that with a focus on offering customers "good products at great value" and D-Mart is poised to dominate the Indian retail landscape in a big way. In line with the opportunity in this space, D-Mart's MD/CEO, Mr. Neille Noronha has explicitly stated that the company is shifting its corporate strategy to aggressive store expansion. Moving from a historical 10 stores-per-year growth, D-Mart has now reached a 15-20 stores-per-year velocity, according to his own admission. The company is also open to changing its own-and-operate model to lease-and-operate model if it would permit further growth in store count. | Risk-free Rate | 4 | High | GBP | |||||||||||||||||||||
5 | The Numbers | 5 | AUD | |||||||||||||||||||||||
6 | Sales | ₹ 15,970.19 | Previous Sales | ₹ 12,826.85 | Operating Income | ₹ 1,351.48 | Depreciation | ₹ 161.27 | Tax Rate | 34.96% | Number of Shares | 62.41 | 6 | #NUM! | CAD | |||||||||||
7 | Equity | ₹ 4,642.71 | Debt | ₹ 246.00 | Cost of Debt | 8.50% | Cash | ₹ 556.46 | Cash Equivalents | ₹ 0.00 | Non-operating Assets | ₹ 444.46 | 7 | CHF | ||||||||||||
8 | Risk-free Rate | 8.14% | Company Beta | 1.44 | Industry Beta | 1.29 | Industry D/E | 0.02 | Indexed Returns | 13.00% | Minority Interests | ₹ 0.00 | 8 | CNY | ||||||||||||
9 | The Capital Conversions | 9 | SEK | |||||||||||||||||||||||
10 | Research & Development | Debt | Operating Lease | Equity Options | 10 | MXN | ||||||||||||||||||||
11 | R&D Expense | ₹ 0.00 | Life of R&D | 0.00 | Interest Expense | ₹ 45.10 | Lease Expense | Year | Lease Commitment | PV (Lease) | Number of SOPs | 1.40 | NZD | |||||||||||||
12 | Year | R&D Expense | R&D Asset | R&D Amortization | Debt (Type A) | ₹ 246.00 | ₹ 47.58 | Average Exercise Price | ₹ 299.00 | SGD | ||||||||||||||||
13 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Maturity (Type A) | 4.00 | Explicit Duration | 1 | ₹ 57.00 | ₹ 52.54 | Time to Expiry | 4.04 | HKD | |||||||||||||
14 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Debt (Type B) | ₹ 0.00 | 30.00 | 2 | ₹ 39.55 | ₹ 33.60 | Standard Deviation | 34.97% | NOK | |||||||||||||
15 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Maturity (Type B) | 0.00 | Embedded Duration | 3 | ₹ 39.55 | ₹ 30.97 | Dividend Yield | 0.00% | KRW | |||||||||||||
16 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Debt (Type C) | ₹ 0.00 | 1.00 | 4 | ₹ 39.55 | ₹ 28.54 | Adjusted Price | ₹ 1,632.74 | TRY | |||||||||||||
17 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Maturity (Type C) | 0.00 | Value of Lease | 5 | ₹ 39.55 | ₹ 26.30 | Adjusted Interest Rate | 8.14% | INR | |||||||||||||
18 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Debt (Type D) | ₹ 0.00 | ₹ 173.09 | 6 | ₹ 0.00 | ₹ 0.00 | Variance | 12.23% | RUB | |||||||||||||
19 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Maturity (Type D) | 0.00 | Adjustments | 7 | ₹ 0.00 | ₹ 0.00 | d1 | 3.23 | BRL | |||||||||||||
20 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Debt (Type E) | ₹ 0.00 | Depreciation | 8 | ₹ 0.00 | ₹ 0.00 | N (d1) | 1.00 | ZAR | |||||||||||||
21 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Maturity (Type E) | 0.00 | ₹ 5.58 | 9 | ₹ 0.00 | ₹ 0.00 | d2 | 2.53 | DKK | |||||||||||||
22 | 0 | ₹ 0.00 | ₹ 0.00 | ₹ 0.00 | Maturity of Debt | 4.00 | Earnings | 10 | ₹ 0.00 | ₹ 0.00 | N (d2) | 0.99 | PLN | |||||||||||||
23 | Adjustments | ₹ 0.00 | ₹ 0.00 | Value of Debt | ₹ 383.25 | ₹ 42.00 | 10+ Years | ₹ 14.42 | ₹ 1.15 | Value of Equity Options | ₹ 1,984.90 | BDT | ||||||||||||||
24 | The Assumptions | THB | ||||||||||||||||||||||||
25 | Value Drivers | Base Year | High Growth Period | Terminal Year | Link to the Narratives | MYR | ||||||||||||||||||||
26 | High Growth Period | 20 Years | Years 1-5 | Years 6-10 | Years 11-15 | Years 16-20 | After Year 20 | Retail chains often have very long growth trajectories | ||||||||||||||||||
27 | Sales Growth | 24.51% | 35.00% | 31.50% | 28.35% | 25.52% | 4.07% | Shift in the corporate strategy to aggressive expansion | ||||||||||||||||||
28 | Operating Margin | 8.73% | 7.22% | 7.94% | 8.74% | 8.02% | 7.30% | Motto of delivering 'good products at great value' points to steady margins | ||||||||||||||||||
29 | Tax Rate | 34.96% | 34.63% | 34.63% | 34.63% | 34.63% | 27.59% | Corporate Tax Rate will approach the Global Average Tax Rate | ||||||||||||||||||
30 | Capital Turnover | 6.01 | 3.49 | 3.40 | 3.32 | 3.23 | 2.96 | Changing 'own-and-operate' to 'lease-and-operate' model will slightly dent Capital efficiency | ||||||||||||||||||
31 | Reinvestment Rate | 129.42% | 157.40% - 146.10% | 135.60% - 125.74% | 116.58% - 118.27% | 119.90% - 78.85% | 25.00% | Massive reinvestments are natural for retail chains | ||||||||||||||||||
32 | Return on Capital | 18.93% | 16.30% - 17.13% | 17.88% - 18.52% | 19.30% - 18.19% | 17.32% - 17.01% | 16.98% | Return on Capital converges on the Cost of Capital | ||||||||||||||||||
33 | Depreciation | 1.04% | 1.06% | 1.06% | 1.06% | 1.06% | 1.06% | Depreciation remains fairly stable | ||||||||||||||||||
34 | Industry Beta | 14.23% | 14.23% | 14.23% | 14.23% | 14.23% | 14.23% | Discounted at the Bottom-up Beta-based CAPM Cost of Capital | ||||||||||||||||||
35 | The Diagnostics | |||||||||||||||||||||||||
36 | Value Drivers | Assumptions | Diagnosis | Solution | ||||||||||||||||||||||
37 | Inputs | Complete | All the inputs are complete | Nothing | ||||||||||||||||||||||
38 | Sales Growth | Valid | This is a reasonable estimate of Growth | Nothing | ||||||||||||||||||||||
39 | Operating Margin | Valid | This is a reasonable estimate of Operating Margin | Nothing | ||||||||||||||||||||||
40 | Tax Rate | Valid | This is reasonable estimate of Tax Rate | Nothing | ||||||||||||||||||||||
41 | Capital Turnover | Valid | This is a reasonable estimate of Capital Turnover | Nothing | ||||||||||||||||||||||
42 | Reinvestment Rate | Valid | This is a reasonable estimate of Reinvestment Rate | Nothing | ||||||||||||||||||||||
43 | Return on Capital | Unlikely | A mature firm often does not generate a Return on Capital far exceeding the Risk-free Rate or the kind of Returns it generated when it was a young firm | Does the firm enjoy a superior pricing power? If not, consider decreasing the Operating Margin estimates | ||||||||||||||||||||||
44 | Depreciation | Valid | This is a reasonable estimate of Depreciation | Nothing | ||||||||||||||||||||||
45 | The Cash Flows | |||||||||||||||||||||||||
46 | Year | Sales | Operating Margin | Operating Profit | Tax Rate | Profit After Tax | Reinvestment | Reinvestment Rate | Invested Capital | Return on Capital | Depreciation | Free Cash Flow | ||||||||||||||
47 | 1 | ₹ 21,559.76 | 7.22% | ₹ 1,556.61 | 34.63% | ₹ 1,017.56 | ₹ 1,601.59 | 157.40% | ₹ 6,244.19 | 16.30% | ₹ 228.53 | -₹ 355.50 | ||||||||||||||
48 | 2 | ₹ 28,954.75 | 7.36% | ₹ 2,132.34 | 34.63% | ₹ 1,393.91 | ₹ 2,129.56 | 152.78% | ₹ 8,373.75 | 16.65% | ₹ 306.92 | -₹ 428.72 | ||||||||||||||
49 | 3 | ₹ 38,835.56 | 7.40% | ₹ 2,874.03 | 34.63% | ₹ 1,878.75 | ₹ 2,848.98 | 151.64% | ₹ 11,222.74 | 16.74% | ₹ 411.66 | -₹ 558.58 | ||||||||||||||
50 | 4 | ₹ 51,974.93 | 7.46% | ₹ 3,877.68 | 34.63% | ₹ 2,534.84 | ₹ 3,796.50 | 149.77% | ₹ 15,019.24 | 16.88% | ₹ 550.93 | -₹ 710.73 | ||||||||||||||
51 | 5 | ₹ 69,256.59 | 7.58% | ₹ 5,250.34 | 34.63% | ₹ 3,432.15 | ₹ 5,014.45 | 146.10% | ₹ 20,033.68 | 17.13% | ₹ 734.12 | -₹ 848.18 | ||||||||||||||
52 | 6 | ₹ 91,072.42 | 7.94% | ₹ 7,232.97 | 34.63% | ₹ 4,728.19 | ₹ 6,411.23 | 135.60% | ₹ 26,444.92 | 17.88% | ₹ 965.37 | -₹ 717.67 | ||||||||||||||
53 | 7 | ₹ 119,186.47 | 8.10% | ₹ 9,655.11 | 34.63% | ₹ 6,311.54 | ₹ 8,303.68 | 131.56% | ₹ 34,748.59 | 18.16% | ₹ 1,263.38 | -₹ 728.76 | ||||||||||||||
54 | 8 | ₹ 155,791.62 | 8.14% | ₹ 12,682.29 | 34.63% | ₹ 8,290.42 | ₹ 10,825.18 | 130.57% | ₹ 45,573.77 | 18.19% | ₹ 1,651.39 | -₹ 883.37 | ||||||||||||||
55 | 9 | ₹ 203,230.17 | 8.21% | ₹ 16,678.56 | 34.63% | ₹ 10,902.77 | ₹ 14,058.39 | 128.94% | ₹ 59,632.16 | 18.28% | ₹ 2,154.24 | -₹ 1,001.38 | ||||||||||||||
56 | 10 | ₹ 264,046.79 | 8.34% | ₹ 22,019.13 | 34.63% | ₹ 14,393.90 | ₹ 18,099.03 | 125.74% | ₹ 77,731.18 | 18.52% | ₹ 2,798.90 | -₹ 906.23 | ||||||||||||||
57 | 11 | ₹ 338,904.06 | 8.74% | ₹ 29,607.34 | 34.63% | ₹ 19,354.32 | ₹ 22,563.13 | 116.58% | ₹ 100,294.31 | 19.30% | ₹ 3,592.38 | ₹ 383.57 | ||||||||||||||
58 | 12 | ₹ 433,061.77 | 8.59% | ₹ 37,211.18 | 34.63% | ₹ 24,324.95 | ₹ 28,523.19 | 117.26% | ₹ 128,817.51 | 18.88% | ₹ 4,590.45 | ₹ 392.21 | ||||||||||||||
59 | 13 | ₹ 552,765.46 | 8.56% | ₹ 47,298.34 | 34.63% | ₹ 30,918.93 | ₹ 36,307.45 | 117.43% | ₹ 165,124.95 | 18.72% | ₹ 5,859.31 | ₹ 470.79 | ||||||||||||||
60 | 14 | ₹ 704,250.84 | 8.50% | ₹ 59,839.02 | 34.63% | ₹ 39,116.77 | ₹ 46,043.71 | 117.71% | ₹ 211,168.67 | 18.52% | ₹ 7,465.06 | ₹ 538.11 | ||||||||||||||
61 | 15 | ₹ 893,923.19 | 8.38% | ₹ 74,885.29 | 34.63% | ₹ 48,952.51 | ₹ 57,893.83 | 118.27% | ₹ 269,062.50 | 18.19% | ₹ 9,475.59 | ₹ 534.27 | ||||||||||||||
62 | 16 | ₹ 1,122,007.69 | 8.02% | ₹ 89,963.70 | 34.63% | ₹ 58,809.27 | ₹ 70,510.94 | 119.90% | ₹ 339,573.44 | 17.32% | ₹ 11,893.28 | ₹ 191.61 | ||||||||||||||
63 | 17 | ₹ 1,360,167.29 | 7.87% | ₹ 107,106.10 | 33.22% | ₹ 71,523.31 | ₹ 74,897.28 | 104.72% | ₹ 414,470.72 | 17.26% | ₹ 14,417.77 | ₹ 11,043.80 | ||||||||||||||
64 | 18 | ₹ 1,634,295.41 | 7.84% | ₹ 128,105.47 | 32.87% | ₹ 85,997.20 | ₹ 86,582.66 | 100.68% | ₹ 501,053.38 | 17.16% | ₹ 17,323.53 | ₹ 16,738.07 | ||||||||||||||
65 | 19 | ₹ 1,934,466.44 | 7.78% | ₹ 150,476.99 | 32.28% | ₹ 101,898.00 | ₹ 95,498.52 | 93.72% | ₹ 596,551.90 | 17.08% | ₹ 20,505.34 | ₹ 26,904.82 | ||||||||||||||
66 | 20 | ₹ 2,220,632.07 | 7.66% | ₹ 170,079.32 | 31.11% | ₹ 117,167.64 | ₹ 92,388.03 | 78.85% | ₹ 688,939.93 | 17.01% | ₹ 23,538.70 | ₹ 48,318.31 | ||||||||||||||
67 | 20 - ∞ | ₹ 2,311,034.00 | 7.30% | ₹ 168,705.48 | 27.59% | ₹ 122,159.64 | ₹ 30,539.91 | 25.00% | ₹ 719,479.84 | 16.98% | ₹ 24,496.96 | ₹ 116,116.69 | ||||||||||||||
68 | The Value | The Sensitivity of Value | ||||||||||||||||||||||||
69 | Value of the Firm | ₹ 75,168.45 | Sensitivity | 12.40% | Win-Loss Ratio | 0.67 | Standard Deviation | 68.00% | ||||||||||||||||||
70 | (-) Value of Debt and Operating Leases | ₹ 556.35 | Variables | Cost of Capital (Industry Beta) | ||||||||||||||||||||||
71 | (+) Cash, Cash Equivalents and Non-operating Assets | ₹ 1,000.92 | Terminal Growth | 17.98% | 16.00% | 14.23% | 12.47% | 10.92% | ||||||||||||||||||
72 | (-) Minority Interests | ₹ 0.00 | 2.74% | ₹ 435.14 | ₹ 675.61 | ₹ 1,039.70 | ₹ 1,664.77 | ₹ 2,611.11 | ||||||||||||||||||
73 | (-) Value of Equity Options | ₹ 1,984.90 | 3.12% | ₹ 444.92 | ₹ 694.13 | ₹ 1,073.86 | ₹ 1,731.28 | ₹ 2,737.79 | ||||||||||||||||||
74 | (-) Probability of Failure | 1.00% | 3.57% | ₹ 456.72 | ₹ 716.68 | ₹ 1,115.88 | ₹ 1,814.27 | ₹ 2,898.71 | ||||||||||||||||||
75 | Value of Equity | ₹ 72,912.36 | 4.07% | ₹ 471.11 | ₹ 744.47 | ₹ 1,168.31 | ₹ 1,919.68 | ₹ 3,107.76 | ||||||||||||||||||
76 | Value of Equity per Share | ₹ 1,168.31 | 4.58% | ₹ 486.59 | ₹ 774.71 | ₹ 1,226.22 | ₹ 2,038.58 | ₹ 3,350.06 | ||||||||||||||||||
77 | (-) Expected Margin of Safety | 5.00% | 5.14% | ₹ 505.44 | ₹ 812.05 | ₹ 1,298.99 | ₹ 2,191.76 | ₹ 3,672.89 | ||||||||||||||||||
78 | Expected Purchase Price of Equity per Share | ₹ 1,109.89 | 5.78% | ₹ 528.71 | ₹ 858.97 | ₹ 1,392.43 | ₹ 2,394.95 | ₹ 4,120.74 | ||||||||||||||||||
79 | Market Price of Equity per Share | ₹ 1,624.84 | Pessimistic Value | ₹ 435.14 | Probable Value | ₹ 1,168.31 | Optimistic Value | ₹ 4,120.74 | ||||||||||||||||||
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81 | "Numbers and Narratives" is a simple Discounted Cash Flow model built and improvised by Dinesh Sairam, inspired by Prof. Aswath Damodaran (Dean of Valuation, NYU Stern School of Business). For more Valuation-related content, visit www.valuationinmotion.blogspot.in or write to dineshssairam@gmail.com for queries. | |||||||||||||||||||||||||
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