DMart Q3 Review: Analysts Cut Target Amid Margin Pressure As Market Share Pursuit Intensifies

The profit margin of Indian supermarket chain Avenue Supermarts Ltd. is set to come under pressure amid its margin focus while the competition in the industry is on the rise, analysts noted after the third quarter earnings missed expectations.

The Radhakishan Damani-led company's net profit rose 4% over the same period last year to Rs 723.5 crore in the three months to December, against the expectations of Rs 847 crore. Operating profit margin declined by 63 basis points to 7.62% due to high discounts.

DMart has deployed increasing discounts across segments to protect bill size and growing footfall despite rising competition from quick commerce, Nuvama Institutional Equities said in a report. "Margins would continue to be under pressure amid the high competition and management's focus on market share followed by margins."

The brokerage cut its profit estimates for fiscal 2025 and 2026 by 11% and 17.4%, respectively, on account of lower margins. "DMart Ready has also stepped up its game in its home delivery execution," Nuvama said. It maintained its 'hold' and lowered its target to Rs 4,212 apiece, from Rs 5,040 per share earlier. This implies an upside of 13% from the previous close.

Given the recent fundraising by the top three quick commerce players, the competitive intensity has increased significantly, Motilal Oswal said in a report. DMart's value-focused model would co-exist with the quick commerce convenience model over the longer term, it said.

"Rising competition on pricing could weigh on DMart's growth and margins in the near term," Motilal Oswal said. The brokerage reduced its Ebitda and earnings per share for fiscal 2025-27.

Motilal Oswal reiterated 'buy' with a revised target price of Rs 4,450 per share from Rs 4,750 per share, earlier. This implies an upside of 20% from the previous close.

Meanwhile, Citi Research attributed the margin contraction to a decline in general merchandise and apparel mix, increased discounting and negative operating leverage. Citi said it seeks a better entry point as risk-reward seems unfavourable at the current levels.

The brokerage maintains 'sell' with a target price of Rs 3,350, implying a 9% downside from the previous close.

Avenue Supermarts has announced the appointment of Anshul Asawa as chief executive officer designate and senior managerial personnel as Ignatius Navil Noronha, the current MD, will complete his five-year term on Jan. 31, 2026.

Shares of DMart have fallen 4.5% during the last 12 months. The relative strength index was at 48.

Twelve of the 30 analysts tracking the company have a 'buy' rating on the stock, eight suggest a 'hold' and 10 have a 'sell', according to Bloomberg data. The average of 12-month analysts' price targets implies a potential upside of 10.5%.