DMart bleeds 6% as analysts see margin pressure ahead, cut target after Q3

Brokerages on DMart Q3 results: Avenue Supermarts (DMart) shares slipped as much as 5.74 per cent to hit an intraday low of Rs 3,474 per share on Monday. However, the stock recovered slightly to close at Rs 3,507.95, down 4.82 per cent. Notably, the 52-week low for DMart shares is Rs 3,400. The downward movement in DMart’s share price was triggered by the company’s 2024-25 (FY25) October-December quarter (Q3) results, which missed Street expectations.

 

Given the muted operational performance, several brokerages have revised their target prices for DMart, citing concerns about sustained margin pressure.

 

Analysts at Nuvama Institutional Equities believe DMart’s margins will remain under pressure due to heightened competition and the management’s focus on prioritising market share over margins.

Consequently, Nuvama Research has reduced its revenue/net profit estimates for FY25 and 2025-26 (FY26) by 0.5 per cent/11 per cent and 2.1 per cent/17.4 per cent, respectively. Factoring in these adjustments and rolling forward to the nine months (9M) of 2026-27 (FY27), the analysts have revised their target price to Rs 4,212 (previously Rs 5,040) while maintaining a ‘hold’ rating.

 

Similarly, Motilal Oswal has reiterated its ‘buy’ rating but lowered its target price to Rs 4,450 from Rs 4,750. The brokerage highlights that recent fundraising by the top three quick commerce (qcom) players has intensified competition. While Motilal Oswal Research believes DMart’s value-focused model will coexist with qcom’s convenience-driven model in the long term, rising competition in pricing could impact DMart’s growth and margins in the near term.

 

Analysts at JM Financial Research have revised the target price to Rs 3,880 (from Rs 4,450), maintaining a ‘hold’ rating despite rolling over to March 2027 earnings. This adjustment reflects a 4-7 per cent cut in FY25-27 earnings estimates due to the operational miss and a reduced target multiple of 60x (versus 67x). The lower valuation accounts for anticipated pressure from qcom competitors, the resignation of long-standing managing director (MD) and chief executive officer (CEO) Neville Noronha, and aligning DMart’s price-to-earnings multiple with other discretionary peers showing similar mid-teens net profit growth for 2023-24 (FY24) through FY27.

 

Kotak Institutional Equities pointed out that the gross margin at 14.7 per cent (versus 14.9 per cent in Q3FY24) was impacted by higher fast-moving consumer goods price competition. Elevated operating costs led to a 63-basis point margin decline and 8.7 per cent earnings before interest, tax, depreciation, and amortisation (Ebitda) growth. Hence, analysts at the brokerage have cut FY25-27 earnings estimates by 3-5 per cent and maintain a ‘sell’ rating with a fair value of Rs 3,450.

 

Analysts at ICICI Securities have raised concerns over the accelerated ramp-up of qcom in large metro cities, which poses challenges for DMart. While retail expansion has been stable at 13 per cent year-on-year (Y-o-Y), profitability pressures persist.

 

A higher-than-expected overlap of consumers seeking convenience and value shopping at DMart has created uncertainty regarding its growth trajectory. The scale-up of DMart Ready has been noticeably slower (+21.5 per cent Y-o-Y in 9MFY25) compared to qcom competitors. With Anshul Asawa (formerly of Unilever) set to succeed Neville Noronha as MD and CEO in February 2026, analysts have revised their earnings estimates downward by 1 per cent and 3 per cent for FY25E (E = Estimates) and FY26E, respectively. They now project revenue/Ebitda/net profit growth of 17 per cent/16 per cent/14 per cent over FY24-27.

 

ICICI Securities maintains a ‘reduce’ rating with an unchanged discounted cash flow-based target price of Rs 3,300, identifying major improvements in general merchandise and apparel recovery, as well as reduced competition from qcom, as key upside risks.