DMart Q1 Results Review: HDFC Securities Maintains 'Add' Rating Though Margin Disappoints — Here's Why

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HDFC Securities Institutional Equities

Avenue Supermarts Ltd. reported a standalone revenue of Rs 159.3 billion in Q1, reflecting a 16.2% YoY growth. Management attributed the 100-150 bps topline drag to sharp deflation in many staples and non-food products. Q1 FY26 same-store sales growth stood at 7.1%.

Sales density grew ~2% YoY to Rs 38.2k/sq. ft. annualized. Margins surprised negatively, with Ebitdam contracting 66bps YoY to 8.2% (our estimate: 8.8%), due to-

1. continued competitive intensity in FMCG (gross margin impact: -27bps YoY),

2. ongoing investments in service level improvements,

3. capacity building costs, and

4. inflation at entry level wages.

Given the higher retailing cost and sustained pressure on margins, we have cut our FY26/27 EPS estimates by ~3/2% respectively.

However, we maintain our Add rating with a DCF-based target price of Rs 4,000/share, implying 60x Jun-27 P/E.

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