HSBC has maintained its “Reduce” rating on Avenue Supermarts, even as it raised the target price to Rs 4,070 from Rs 3,500, reflecting improved execution and faster store expansion. The brokerage acknowledged that DMart's operational momentum has picked up meaningfully, particularly in store additions, but stressed that the broader competitive landscape remains unchanged.
The note strikes a cautious tone—while near-term performance metrics are improving, structural concerns around DMart's value leadership and competitive positioning continue to weigh on the long-term thesis. A key positive highlighted by HSBC is the sharp scale-up in store additions. The brokerage now expects DMart to add 90–95 stores across FY27 and FY28, significantly higher than its earlier estimate of 65–70 stores.
This acceleration follows a strong FY26, where store additions exceeded expectations, signalling improved execution capabilities. Historically, DMart has faced challenges in scaling store expansion due to its ownership-led model and operational constraints. However, recent trends suggest these bottlenecks may be easing.
HSBC has marginally lifted its estimates and valuation multiple to factor in this faster expansion, indicating better visibility on growth in the medium term.
The brokerage also sees a potential demand tailwind from rising inflation, which could drive a recovery in like-for-like (LFL) sales growth in FY27. Inflation typically benefits value retailers like DMart, as consumers trade down and increase purchase frequency for essentials.
However, HSBC cautions that this tailwind may be cyclical rather than structural. While inflation can boost footfall and basket sizes temporarily, it does not fully address deeper concerns around DMart's competitive positioning. Despite the improved execution, HSBC remains wary of intensifying competition, particularly in urban markets where quick commerce players and other retail formats are gaining ground.
The brokerage noted that DMart's value leadership—once its strongest differentiator—is less pronounced in these markets. In contrast, peers with stronger private label strategies and more flexible store formats may be better positioned to capture evolving consumer demand. This creates a trade-off between growth and margins, as DMart pushes store expansion while navigating a more crowded and competitive retail environment.
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