Avenue Supermarts, operating the DMart retail chain, has reported first-quarter results that largely failed to impress Dalal Street analysts. The Radhakishan Damani-led company saw revenue growth fall short of expectations, with new store additions moderating and like-for-like (LFL) growth in metropolitan areas remaining flat.
Analysts Flag High Valuation and Slowed Growth
Several brokerage firms have highlighted that DMart's high valuation, combined with slower growth metrics, poses a significant de-rating risk for the stock. Store additions, a crucial growth lever for DMart, slowed to just three new stores in the quarter, bringing the total count to 503.
Emkay Global issued a 'Sell' recommendation, setting a target price of Rs 3,700. Their primary concerns stem from slower growth in bill size and a likely slower ramp-up in new store additions. While the revenue mix improved, driven by a 19% increase in the General Merchandise and Apparel segment, which boosted gross margins by 50 basis points, ongoing growth investments limited EBITDA margin gains to approximately 10 basis points, resulting in slower profit after tax (PAT) growth of 13%.
Equirus Securities noted that DMart's revenue growth slightly missed their projections due to flat metro LFL performance, implying a 14-15% non-metro LFL. They maintain an 'Accumulate' rating with a target of Rs 4,700, anticipating key triggers from non-metro LFL, increased store additions in the second half, and stable margins.
Mixed Outlook on Future Performance
Nuvama revised its target price downwards to Rs 4,383 from Rs 4,974, maintaining a 'Hold' rating. They observed a slowdown in DMart Ready's growth, serving as a proxy for the consolidated minus standalone business, which grew by 5.5% in Q1FY27 compared to 20% in Q1FY26. Losses for DMart Ready also increased to Rs 75.30 crore. Nuvama, however, expects the pace of store openings to pick up notably in the latter half of the year, supported by the approved NCD fundraise of Rs 1,100 crore.
Conversely, MOFSL reiterated a 'BUY' recommendation, assigning a target of Rs 4,800. Despite the moderated pace of store additions in Q1, they remain optimistic about DMart's long-term prospects.
The company also refined its operating model during the quarter, discontinuing operations in seven marginal contributing cities, and is now focused on 11 key metropolitan areas.