Walk into any DMart store on a weekend and the picture is familiar. Crowded aisles. Trolleys filled with groceries. Long billing queues. No flashy displays. No loud branding. Yet, Avenue Supermarts, the company that owns DMart and is backed by veteran investor Radhakishan Damani, has built one of India’s largest value retail businesses by keeping things simple and price-focused. The company reported 18% surge in Q3 profit but Jefferies is not convince.
Despite this strong on-ground presence, global brokerage house Jefferies is cautious on the stock at the moment. Jefferies has maintained a ‘Hold’ rating on DMart, and sees a limited upside potential of around 6%, with a target price of Rs 4,050.
So why is Jefferies recommending Hold on this retail stock. Let’s take a look at the key reason driving the investment rationale –
Jefferies on DMart: Upside exists, but not enough to turn bullish
The international brokerage house believes that DMart’s business fundamentals remain stable, but the pace of growth has moderated. The brokerage has retained its target price of Rs 4,050, which implies a modest upside of 6% from current levels.
As per the brokerage house report, “We tweak estimates and retain ‘Hold’.”
The brokerage sees earnings stability, but believes the stock price already reflects much of the positives.
Jefferies on DMart: Revenue growth slows, store additions do the heavy lifting
One of the key concerns highlighted by Jefferies is the moderation in like-for-like growth. Like-for-like growth measures how existing stores perform, excluding new additions.
According to the brokerage report, “Like-for-like (LFL) revenue growth…came in at 5.6%.” This is lower than what the market had seen earlier.
Jefferies noted that overall revenue growth was driven more by new store additions rather than higher sales from existing stores. The report added that revenue growth moderated to about 13% year-on-year, partly due to deflation in staple food prices.
Jefferies on DMart: Margins surprise on the upside
While revenue growth slowed, profitability improved. This was one of the positives highlighted in the report.
Jefferies noted, “EBITDA margins expanded smartly to a multi-quarter high.” Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) rose sharply due to better cost control and improved gross margins.
The brokerage added, “Q3 standalone EBITDA grew 20% YoY… EBITDA margin expanded 50bps YoY to 8.4%.” This was the highest margin level in the last six quarters.
Jefferies on DMart: Per-store performance sends mixed signals
Jefferies also looked closely at store-level data. According to the report, “Per-store revenue declined by 1% YoY.” This is notable because DMart has seen positive per-store growth over the last three years.
However, profitability per store improved. The report said, “Per-store EBITDA increased by 5% YoY.” Both gross profit and operating profit per square foot touched multi-quarter highs.
Jefferies on DMart: Store expansion steady, but geography remains uneven
DMart added 10 stores during the quarter, taking its total store count to 442. Jefferies expects store additions to remain steady, although expansion may remain uneven across regions.
The brokerage pointed out that despite expectations of faster expansion in Uttar Pradesh, DMart still operates only one store in the state.
On the online front, DMart Ready continues to operate in 19 cities, with no new city additions during the quarter.
Jefferies on DMart: Labour codes and management change – Limited impact expected
The brokerage also addressed concerns around new labour regulations. According to Jefferies, “Overall impact is unlikely to be material.” The company has already provided for incremental costs related to its own employees and is evaluating the impact on contract workers.
Another important development is the leadership transition. Jefferies noted, “Q3FY26 was the last full qtr for Ignatius Navil Noronha.” He will step down as Managing Director and Chief Executive Officer, with Anshul Asawa taking over in phases starting February 2026.
Despite stable operations, Jefferies believes valuations remain stretched. The brokerage values DMart’s standalone business at 55 times estimated March 2028 earnings per share.
As per the base case, Jefferies forecasts “16% annual growth in revenues over FY25-FY28 and similar growth in EBITDA. This leads to the target price of Rs 4,050.
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.