DMart surprised investors in the third quarter of FY26 by delivering earnings that were well above expectations, thanks mainly to better profit margins.
Why margins improved
The company’s gross margin rose 50 basis points year‑on‑year to 14.6%, beating forecasts by about 60 basis points. The improvement came from two key factors:
- GST reduction: Lower taxes meant the retailer could offer fewer discounts.
- Better product mix: More sales came from higher‑margin items like FMCG and grocery‑and‑mart (GM&A) and less from the low‑margin food segment.
In addition, the cost of running stores per square foot stayed flat, helping the EBITDA margin climb another 50 basis points to 8.4% and delivering a 20% rise in standalone EBITDA.
Revenue growth slows, stores keep opening
Top‑line growth eased to about 13% year‑on‑year, even though the chain added roughly 14% more selling space. Same‑store sales grew only 5.6% in the quarter, down from 6.8% in the previous quarter and 8.3% a year earlier. The slowdown reflects the larger footprint rather than weaker demand.
DMart opened 10 new stores in Q3, bringing the nine‑month total to 27 stores—up from 22 in the same period last year. Management plans to add about 60 stores in FY26, making expansion the main driver of future growth.
Analyst outlook
Motilal Oswal assigns a 43x FY28 EV/EBITDA multiple (equivalent to roughly 79x FY28 P/E) to the business and raises its target price to INR 4,600 per share. The firm maintains a BUY recommendation.
Bottom line
DMart’s profit beat shows that margin improvements can offset slower same‑store sales, while aggressive store roll‑outs remain central to its growth story.
Disclaimer
Remember, this is just an analysis, not a prediction. Do your own research or talk to a certified financial adviser before making any investment decisions.