DMart shares experienced a significant dip after the company announced its Q4 FY26 results, leading to a divergence in brokerage ratings from 'sell' to 'buy' as analysts weigh valuation, competitive pressures, and future growth strategies.
Key Points
- Avenue Supermarts (DMart) shares dropped 5.2 per cent following its Q4 FY26 earnings report, despite a 19 per cent year-on-year increase in net profit and revenue.
- Emkay maintained a 'sell' rating on DMart, citing concerns over slow market expansion, fading competitive advantage against quick commerce, deteriorating return on invested capital, and high valuation.
- Motilal Oswal Financial Services issued a 'buy' rating, highlighting accelerated store openings (85 in FY26) as a key growth driver and DMart's long-term competitiveness in Tier-II and smaller towns.
- ICICI Securities holds a 'hold' rating, acknowledging strong revenue growth and store expansion but expressing caution due to increasing debt, heavier inventory, and pressure on return ratios.
Shares of Avenue Supermarts, the operator of DMart, slipped as much as 5.2 per cent on the BSE, hitting an intraday low of Rs 4,350 per share. At the close of the day’s trade, the stock was down 4.85 per cent at Rs 4,368 per share. By comparison, the Sensex rose 0.46 per cent to 77,269.4.
Q4 FY26 Performance Overview
The company reported its 2025-26 (FY26) fourth-quarter (January-March/Q4) numbers on Saturday.
In Q4, it posted a year-on-year (Y-o-Y) net profit of Rs 656.59 crore, up 19 per cent from Rs 550.9 crore a year ago.
Revenue stood at Rs 17,683.86 crore, also up 19 per cent from Rs 14,871.86 crore a year earlier.
DMart credited the like-for-like (LFL) uplift to a spike in consumer buying in March 2026 amid geopolitical tensions, which normalised towards the end of Q4.
This was also reflected in a 5 per cent increase in average basket value.
Brokerage Reactions and Outlook
Emkay maintained a “sell” rating on DMart with an unchanged target price, citing slow total addressable market expansion, a fading USP on value/assortment versus quick commerce (qcom), deteriorating return on invested capital, and an expensive valuation at 80x one-year forward price-to-earnings.
The brokerage said Q4 was a healthy, in-line quarter, with 23-25 per cent growth in earnings before interest, tax, depreciation, and amortisation (Ebitda) and profit before tax, aided by improved LFL growth.
Emkay has a “sell” rating with a target price of Rs 3,700.
With accelerated store openings, analysts expect top line growth to inch up to 19 per cent in 2026-27 (FY27), though higher allied costs are likely to restrict net profit growth to 16 per cent.
Capital expenditure (capex) per square foot is likely to be optimised by 18 per cent in FY26, though this is offset by a higher share of leased store additions, which have a lower net present value.
Free cash flow was negative at Rs 900 crore in FY26, of which Rs 600 crore was consumed in the standalone business and about Rs 350 crore was directed towards increased subsidiary investments.
Net subsidiary revenue grew 18 per cent, while losses widened 10 per cent to Rs 240 crore in FY26.
Conflicting Views on DMart's Future
Motilal Oswal Financial Services has a “buy” rating with a target price of Rs 5,200.
Sustained acceleration in store additions — which ramped up to 85 in FY26 — remains the key growth trigger for DMart, the brokerage said.
While competitive intensity from qcom could remain high in the near to medium term, analysts believe DMart’s value-focused model and superior store economics will help it stay competitive and relevant over the long run, especially in Tier-II and smaller towns.
The brokerage has not changed its FY27 through 2027-28 (FY28) Ebitda estimates, but has raised profit after tax forecasts for FY27-28 by 3-7 per cent, driven by a lower-than-expected increase in finance costs and depreciation.
Analysts have built in a compound annual growth rate (CAGR) of 19 per cent, 20 per cent, and 19 per cent in DMart’s consolidated revenue, Ebitda, and net profit, respectively, over FY26-28, supported by a 16 per cent CAGR in area additions and high single-digit LFL growth.
ICICI Securities, on the other hand, has a “hold” rating with a target price of Rs 4,350.
The brokerage said that Avenue Supermarts delivered strong revenue growth in Q4FY26 and crossed the 500-store milestone in FY26, indicating steady execution on the capex front.
While operating profit margin expanded 37 basis points Y-o-Y to 7.2 per cent, ICICI Securities’ channel checks and underlying metrics suggest DMart is working hard for incremental growth.
In analysts’ view, the risk/reward balance is shifting as the company takes on higher debt and carries heavier inventory to sustain growth, leading to pressure on return ratios.
Until there is a clear structural shift in the margin mix (gross margin and administrative expenses recovery) and stabilisation in store-level throughput, the brokerage believes current valuations already reflect long-term expectations.
It remains cautious about the stock’s ability to deliver strong near-term outperformance.
