ICICI Securities' latest research shows that DMart (Avenue Supermarts) is keeping its profit margins healthy but its store growth is slowing down.
Margin Surprise
The company posted an EBITDA margin of 8.4%, better than expected. This came from disciplined cost control and solid execution, even though the product mix was not ideal.
Growth Momentum Slowing
- Same‑store sales growth (L2L) fell to 5.6% in Q3 FY26, down from about 8.3% a year earlier.
- Store productivity has not yet reached pre‑COVID levels.
- The focus on staple items and the measured DMart ReADY expansion help protect earnings, but they also limit the chance to increase ticket size and operating leverage.
What It Means for Investors
For a higher valuation, DMart would need a steady rise in discretionary‑led same‑store sales and better store productivity, not just higher margins. As things stand, earnings are likely to grow steadily rather than sharply.
Analyst Outlook
- Revenue forecasts cut by about 2% for FY26 and 4% for FY27.
- Earnings (EBITDA) estimate raised by roughly 4% for FY26.
- Projected compound annual growth rates (CAGR) for revenue, EBITDA and profit after tax are 16%, 17% and 17% from FY25 to FY28.
- Target price lowered to INR 4,000 from INR 4,400.
- Recommendation remains a “Hold”.
Bottom Line
DMart shows strong margin discipline but its growth pace is easing. Investors can expect steady earnings, but big upside may require a pick‑up in same‑store sales and productivity.
Remember, this is just an analysis, not a prediction. Do your own research before making any investment decisions.