'Reduce' DMart Shares Maintains Dolat Capital Post Q1 Results — Check Revised Target Price

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Dolat Capital Report

Avenue Supermarts Ltd.’s Q1 FY26 results were inline and soft. Standalone Revenue/gross profit /Ebitda/adjusted profit after tax were at 16.2/14.1/7.6/2.3% YoY. Earnings growth was in single digit for four consecutive quarters and ~9% over FY23-25.

The business model remains strong to deliver 14-16% revenue/ EPS CAGR over the long-term, led by sizeable opportunity in large F&G space. Accelerated store expansion, soft base, category-mix improvement, new launches & built-up in DMart Ready are potential triggers.

While increased competition from Qcom presents a short-term challenge, we believe this pressure will ease within two-four quarters due to weak profitability and funding crunch (after which DMart shall benefit even more). In the interim DMart is competing effectively.

We trim our FY26/27E APAT by 1/3% to factor weak margins. Reiterate ‘Reduce’ rating with revised target price of Rs 4,065 (including Rs 200 for DMart Ready) valuing at 65x FY27E standalone EPS (earlier Rs 4,150 @ 65x FY27).

Our rating reflects near-term weak performance, competition from Qcom and rich valuations; bias remains positive.

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