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Dolat Capital Report
Brokerage firm Dolat Capital has reduced its FY27/28 earnings per share estimate of Avenue Supermarts Ltd. by 7/7% led by a tad soft revenue growth and lower Ebitda/adjusted profit after tax margins.
Dmart stock has corrected ~12% in trailing three months. Thus the brokerage has upgraded the stock to ‘Accumulate' from 'Reduce' with a higher target price of Rs 4,580, from earlier Rs 4,395 at 60 times H1 FY29E standalone EPS + Rs 185 for Dmart Ready) vs Rs 4,600 earlier.
Despite earnings cut, increase in target price is due to roll-forward. Sustainable revenue and earnings growth of 17-19% is key trigger.
DMart's Q1 FY27 results were in-line and soft. Standalone revenue/gross profit/Ebitda/APAT came in at 15.1/18.8/16.3/12.8% YoY. Revenue growth was especially weak followed by Ebitda/APAT.
DMart registered soft earnings CAGR of ~9% over FY24-26 despite healthy revenue/Ebitda CAGR of 16/13%. DMart's Ebitda margin declined in 12 out of 14 trailing quarters. H2 FY26 saw healthy expansion and in Q1 FY27 was modest – key positive.
Inflation revival, accelerated store additions and moderation of competition from Qcom are potential triggers. Thus the brokerage expects DMart to deliver a 17% earnings CAGE over FY26-28E.
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