Radhakishan Damani’s Avenue Supermarts, which runs DMart, has reported relatively upbeat Q3 FY26 numbers. The share price jumped over 2% in early trade. However, brokerage houses are split in their recommendations post the earnings. While Nuvama Institutional Equities cut the target price to Rs 4,351 from Rs 4,580 while maintaining a ‘Hold’ rating on the stock, Motilal Oswal has a Buy recommendation.
Here is a detailed analysis of the brokerage analysis of the Q3 performance and what it implies going forward
Nuvama on DMart
Nuvama has a Hold rating on DMart on account of key concerns-
Slowing revenue momentum
The company reported a slowdown in top-line growth, with standalone revenue increasing by 13.2% YoY in Q3FY26, which was hurt by deflation in staples. This led the brokerage to tweak revenue estimates downwards for FY26 and FY27 by 0.6% and 3.7%, respectively.
Weakening operating metrics
Several key performance indicators showed a downward trend. Like-for-like (LFL) growth fell to 5.6% compared to 8.3% in the same quarter of the previous year. Additionally, revenue per square foot decreased by 0.3% YoY, and the number of bills cut per store contracted by 2.1%.
Rising Costs
The brokerage noted an increase in interest and depreciation costs resulting from the management’s increased focus on rental properties, which led to a growth in lease liabilities. Furthermore, entry-level wages have surged due to a demand-supply mismatch of skilled labour.
Motilal Oswal on DMart
However, Motilal Oswal raised the target price to Rs 4,600 from Rs 4,300, implying an upside of 21% from the current market price. The domestic brokerage house retained its ‘Buy’ call on the stock.
“While DMART saw a margin recovery after several quarters, we believe increased pricing competition from QC could prevent margin sustainability and remains a key monitorable in the near term,” said Motilal Oswal.
The brokerage house believes DMart’s value-focused model and superior store economics would ensure its competitiveness and customer relevance over the longer term, despite QC’s convenience-focused model.
Motilal Oswal thinks that Acceleration in store additions remains the key growth trigger for Avenue Supermarts, building 60 store additions in FY26.
JM Financial on Avenue Supermarts
JM Financial‘s assessment was similar to Nuvama. They have cut the target price, slashing it to Rs 3,950 from Rs 4,100. This looks at a downside of 3.7%. The brokerage house maintained a ‘Reduce’ rating on the stock.
JM Financial said that gross margin expansion was a surprise as product mix hasn’t changed materially YoY, suggesting lower discounting was at play. Also, the sharp QoQ drop in opex this quarter is an indicator of aggressive cost control; usually, there is a QoQ uptick in Q3 due to the festive season.
Historically, DMart has prioritised revenue growth over margins and focused on maximising throughput by providing more value to consumers. Thus, this quarter’s performance deviates from the historical trend. However, the brokerage awaits data for a few more quarters before calling out a change in strategy, if that is indeed the case.
Avenue Supermarts share performance
The share price of DMart owner, Avenue Supermarts, has given a return of 7.55% in the last five trading sessions. The stock has risen 1.3% over the previous one month. However, the Supermart’s stock price has declined 3% in the last six months. Avenue Supremart’s stock has raised investors’ wealth by 11% over the previous 12 months.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.