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Motilal Oswal Report
Avenue Supermarts Ltd., which operates the DMart retail chain, received a target price upgrade from Motilal Oswal Financial Services after reporting largely in-line Q1 FY27 results.
The brokerage retained its 'Buy' rating on the stock and revised its target price to Rs 4,800 from Rs 4,750, implying an upside potential of about 18% from current levels.
Valuations and View
Given significant store additions in Q4 FY26 and an overall inflationary environment, growth deceleration to ~15% in Q1 FY27 is a dampener and has reignited concerns about DMart losing market share to quick commerce (QC) in large metro cities.
Commentary on store additions, impact of competitive intensity in large metros and performance of recently opened stores in tier 2 cities remain key monitorables during the upcoming Analyst Day (typically held in the last week of July).
The brokerage continues to build in 85-90 annual store additions in FY27-29.
While the competitive intensity from QC could remain elevated in the near-to medium term, Motilal Oswal believes DMart's value-focused model and superior store economics would ensure its competitiveness and customer relevance over the long run, especially in tier 2+ towns.
Brokerages' FY27-28E Ebitda/PAT estimates remain broadly unchanged.
Motilal Oswal builds in a CAGR of 18%/19%/16% in DMART's consolidated revenue/Ebitda/PAT over FY26-29E, driven by a 15% CAGR in area additions and high-single-digit LFL growth.
Motilal Oswal has assign a ~40x Sep'28E EV/EBITDA (earlier ~41x Jun'28) multiple (implying ~72x Sep'28 P/E) to arrive at a revised target price of Rs 4,800 from earlier TP of Rs 4,750 and reiterates Buy on DMart.
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