DMart Q2 show: Analysts flag margin strain despite steady revenue growth

Avenue Supermarts Ltd, the parent of retail chain DMart, reported steady revenue growth in Q2FY26 but faced continued pressure on margins, according to analysts who maintained a largely cautious stance on the stock.

 

For the quarter ended September 30, 2025, DMart’s standalone revenue rose 15.4 per cent year-on-year (Y-o-Y) to ₹16,219 crore, while earnings before interest, tax, depreciation and amortisation (Ebitda) grew 11.3 per cent to ₹1,230 crore. Net profit increased 5.1 per cent to ₹747 crore, with basic earnings per share (EPS) at ₹11.47, up from ₹10.92 in Q2FY25. On a consolidated basis, revenue stood at ₹16,676 crore, up from ₹14,445 crore a year ago, with Ebitda of ₹1,214 crore and net profit of ₹685 crore.

 

Analysts noted that margin pressures persisted. ICICI Securities said DMart’s Ebitda margin at 7.6 per cent was slightly below estimates due to an “inferior sales mix” with a higher contribution from food items and elevated staff costs to improve service levels. 

 

Nuvama Institutional Equities highlighted that while margins remain under pressure, the pace of contraction was the lowest in four quarters. “Revenue per sq. ft. stood at ₹8,692 (+1.3 per cent Y-o-Y), while bill cuts grew 14 per cent Y-o-Y to 97 million, indicating strong footfalls but smaller basket sizes,” ICICI Securities added.

 

Brokerages pointed to short-term disruption following GST rate cuts as a factor influencing same-store growth. DMart’s like-for-like (LFL) growth for stores two years or older was 6.8 per cent in Q2FY26, compared with 7.1 per cent in Q1FY26. ICICI Securities expects some improvement in H2FY26.  ALSO READ | Why Nuvama turned bullish on Sky Gold ahead of Diwali? Sees 32% upside 

The company continued to expand its brick-and-mortar presence, opening eight new DMart stores during the quarter, taking the total to 432 stores as of September 30. Avenue Supermarts CEO-designate Anshul Asawa said, “Following the government’s recent announcement on GST reforms, we passed on the benefit of reduced GST rates to all our customers, wherever applicable. Two year and older DMart stores grew by 6.8 per cent during Q2FY26 as compared to Q2FY25.”

 

DMart Ready, the company’s e-commerce arm, added 10 new fulfilment centres during the quarter but exited five cities, bringing its presence to 19 cities nationwide. Vikram Dasu, Whole Time Director and CEO of Avenue E-Commerce, said the strategy reflects a focus on deepening presence in key metro cities.

 

Brokerage recommendations, however, were mixed. ICICI Securities maintained a ‘Hold’ with a target price of ₹4,400, citing revenue growth and balance sheet strength but noting margin pressure. Nuvama also maintained ‘Hold’ with a revised target of ₹4,580, adjusting FY26/27 revenue and PAT estimates slightly downward due to slower DMart Ready growth. According to reports, HSBC continued to recommend ‘Reduce’ with a target of ₹3,700, flagging LFL moderation and competitive pressures in quick commerce.

 

Contrastingly, Motilal Oswal remained bullish on the Avenue Supermart stock on the back of DMart’s disciplined execution and strong expansion pipeline. The brokerage said, “Acceleration in store additions remains the primary growth driver for the company. With quick commerce players potentially shifting focus to profitable growth, the peak of competitive intensity may be behind us.” Thus, analysts at Motilal Oswal maintained a ‘Buy’ rating, raising the target price to ₹5,000.

 

Despite margin pressure and competitive challenges, DMart’s robust store expansion, strong footfalls, and cautious e-commerce strategy continue to underpin broker confidence in its medium-term growth trajectory.