DMart falls 5% after Q4 update; Citi says margins key to sustain valuations

Shares of Avenue Supermarts — the parent company of DMart — fell over 5 per cent on Friday, despite the company reporting an increase in standalone revenue, as analysts noted that margin expansion is crucial to sustain current valuations.

 

The standalone revenue from operations for the March quarter stood at ₹14,462.39 crore, up 16.6 per cent compared to the same period last year. Meanwhile, the company said that the total number of stores as of March 31, 2025, stood at 415. 

 

However, analysts at Citi Research noted that the output of DMart continues to be impacted by adverse product mix, store additions in smaller towns, and increasing competitive intensity from quick commerce. The margin expansion is key to sustain current valuations, Citi said in a note. 

 

The brokerage remains cautious on the company given risks to store sales growth due to increasing competitive intensity from quick commerce, store additions, earnings and the price to earnings multiple. Citi maintained its 'sell' call on the stock with the target price of ₹3,350 per share, a downside of 19 per cent from Thursday's close.  

 

 

Stock movement

 

Avenue Supermarts' stock fell as much as 5.09 per cent during the day to ₹3,946 per share, the biggest intraday loss since January 13 this year. The stock pared losses to trade 4.6 per cent lower at ₹3,962.9 apiece, compared to a 1.36 per cent advance in Nifty 50 as of 10:27 AM. 

 

Shares of the company snapped two days of gains on Friday. The stock has risen 13 per cent this year, compared to a 2.5 per cent fall in the benchmark Nifty 50. DMart has a total market capitalisation of ₹2,59 trillion, according to BSE data. The counter of the fast-moving consumer company has risen by 21 per cent from its recent lows of ₹3,340 per share in March this year.  

 

Q3 recap

 

Avenue Supermarts reported a 17.5 per cent increase in standalone revenue from operations at ₹15,565.23 crore for the third quarter that ended December 31, 2024. The company posted a revenue of ₹13,247.33 crore in the December quarter a year ago. The total number of stores as of December 2024 stood at 387. In October- December 2022-23, standalone revenue was ₹11,304.58 crore.