DMart shares in focus after Q1 results. Should you buy, sell or hold?

Economic Times

14-07-2025

Avenue Supermarts, operator of DMart, reported a modest 2% rise in standalone net profit to ₹830 crore for Q1 FY26, with revenue up 16% to ₹15,932 crore.
Synopsis Avenue Supermarts, operator of DMart, announces a 2% rise in net profit for Q1FY26. Revenue increases by 16%. The company opens nine new stores, expanding its reach. However, margin and cost pressures persist. Analysts offer mixed recommendations. Nuvama suggests a Hold, while Motilal Oswal maintains a Buy rating. Both brokerages adjust their earnings estimates due to rising costs and competition. Shares of Avenue Supermarts, which operates the DMart retail chain, will be in focus on Monday after the company reported a 2% year-on-year (YoY) rise in standalone net profit at Rs 830 crore for the first quarter of FY26, compared to Rs 812 crore in the year-ago period.
ADVERTISEMENT Revenue from operations rose 16% YoY to Rs 15,932 crore.
During the quarter, the company opened nine new stores, taking its total count to 424 as of June-end.
The company said revenue growth remained strong, but margin and cost pressures persisted. One of the key factors was high deflation in staple food and non-food items, which impacted sales growth by about 100–150 basis points. The highly competitive FMCG segment also weighed on margins.Standalone EBITDA came in at Rs 1,313 crore, up from Rs 1,221 crore in the same quarter last year. However, EBITDA margin dropped to 8.2% from 8.9% a year ago. On a consolidated basis, EBITDA stood at Rs 1,299 crore with a margin of 7.9%, down from 8.7% in Q1FY25.CEO and MD Neville Noronha said older stores (two years and above) recorded 7.1% growth in the quarter. Operating costs rose due to increased investments in service levels, capacity building, and inflation in entry-level wages. Gross margin also declined year-on-year due to continued pricing pressure in the FMCG segment.
ADVERTISEMENT
Nuvama has maintained a Hold rating on Avenue Supermarts with a revised target price of Rs 4,086. The brokerage expects margin pressures to persist due to competitive intensity and has cut its FY26E and FY27E PAT estimates by around 6% and 8%, respectively. With a roll-forward to Q1FY28 PAT, the target has been revised downward from Rs 4,273 to Rs 4,086.
ADVERTISEMENT
Motilal Oswal has maintained a Buy rating with a target price of Rs 4,500. It noted that Q1FY26 EBITDA grew just 8% YoY—5% below estimates—due to a 25 basis point decline in gross margins and a 9% YoY increase in retail costs per square foot. Revenue rose 16% YoY, largely driven by 14% store expansion, though like-for-like growth slowed to 7.1% amid deflation. The company added nine stores during the quarter, up from six a year ago.
ADVERTISEMENT MOSL also highlighted that elevated operating costs stem from efforts to improve service levels, build capacity, and manage wage inflation. Rising competition from quick commerce players could pressure near-term growth and margins, but strong store-level economics are expected to support long-term competitiveness.
The brokerage cut its FY26–28E EBITDA estimates by 2–3% and EPS by 5–6% due to rising costs and higher finance expenses. It expects a compound annual growth rate (CAGR) of 18% in revenue, 17% in EBITDA, and 15% in PAT over FY25–28.
(You can now subscribe to our ETMarkets WhatsApp channel)
Nikita Papers IPO opens on May 27, price band set at Rs 95-104 per share
Nikita Papers IPO opens on May 27, price band set at Rs 95-104 per share Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained
Why gold prices could surpass $4,000: JP Morgan's bullish outlook explained Cyient shares fall over 9% after Q4 profit declines, core business underperforms
Cyient shares fall over 9% after Q4 profit declines, core business underperforms L&T Technology Services shares slide 7% after Q4 profit dips
L&T Technology Services shares slide 7% after Q4 profit dips Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first?
Trump-Powell standoff puts U.S. Rate policy in crosshairs: Who will blink first? SEBI warns of securities market frauds via YouTube, Facebook, X and more
SEBI warns of securities market frauds via YouTube, Facebook, X and more API Trading for All: Pi42 CTO Satish Mishra on How Pi42 is Empowering Retail Traders
API Trading for All: Pi42 CTO Satish Mishra on How Pi42 is Empowering Retail Traders Security, transparency, and innovation: What sets Pi42 apart in crypto trading
Security, transparency, and innovation: What sets Pi42 apart in crypto trading Bitcoin, Ethereum, or Altcoins? How investors are structuring their crypto portfolios, Avinash Shekhar explains
Bitcoin, Ethereum, or Altcoins? How investors are structuring their crypto portfolios, Avinash Shekhar explains The rise of Crypto Futures in India: Leverage, tax efficiency, and market maturity, Avinash Shekhar of Pi42 explains
NEXT STORY