DMart parent company, Avenue Supermarts’ share price closed Monday’s session down nearly 3% after delivering inline numbers. While the margins are still under pressure, the pace of contraction has become the slowest in 4 quarters. But does it signal a turnaround for the share price? Analysts are divided on the future share price outlook, but expansion in store addition is seen as a key growth driver going forward.
DMart’s store count rose 15% YoY, while the annualised revenue per store rose 1% YoY to Rs 150 crore and annualised revenue/sq. ft grew 1.5% YoY.
Motilal Oswal on DMart
Motilal Oswal has reiterated its ‘Buy’ recommendation on DMart with a target price of Rs 5,000 per share.They highlighted that DMart’s value-focused model and superior store economics “will ensure its competitiveness and customer relevance over the longer term.” Acceleration in store addition remains the key growth trigger, according to them. This implies 18% upside from current levels. The brokerage house highlighted that after three quarters of contraction, DMart’s gross margin expanded 5 bps YoY to 14.2% in Q2. However, the cost of retailing remained elevated, with 7% YoY uptick on a per sqft basis. “With quick commerce (QC) players potentially shifting their focus to profitable growth, we believe the peak of competitive intensity may be behind us,” the domestic brokerage houses added. However, increased pricing competition from the entry of large online/offline retailers into quick commerce is something that needs to be monitored.
Nuvama on DMart
Nuvama has a Hold rating on DMart with a target price of Rs 4,580. The brokerage house has tweaked the target price slightly higher from the previous Rs 4,588 per share levels as the pace of margin contraction is the lowest in four quarters. The gross margins stayed flat at 14.2% due to increased FMCG competition and product shifts. “We estimate margin pressure would persist given sustained competition in the FMCG space. Opex increased due to a surge in wages of entry-level positions due to demand-supply mismatch of skilled workforce, service improvements and future investments,” they added.
HDFC Securities On DMart
HDFC Securities has an ‘Add’ rating on D’Mart with a target price of Rs 4,000 per share. This implies some downside for the stock from current levels. The brokerage house expects store expansion to accelerate in H2FY26, supported by increased borrowings. They suspect “inflation on entry-level wages and expansion-led front loading of costs have impacted margins.”