DMart's revenue growth stood at 15.4% YoY, operating margin at 7.6% leading to a 5.1% YoY PAT growth while PAT margin declined 45 bps YoY to 4.6%. The Q2 FY26 same store revenue growth for two years and older stores was 6.8% (as per the company).
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Systematix Report
Avenue Supermarts Ltd.'s Q2 FY26 revenue performance and store opening rate remained steady, however operating performance deteriorated owing to the higher discounting in the FMCG category, increased competition from quick commerce, rise in wage for entry level positions, continued investments to improve service level of stores, rise in share of low margin Foods category and reduced share of the comparatively high margin FMCG and general merchandise and administrative segment.
We expect the company to open 47/ 49/51 stores in FY26E/ FY27E/ FY28E respectively with a 2.6% CAGR in revenue per sq.ft during FY25-FY28E and margins of 7.7%-7.9% during FY26-FY28E respectively.
We have build in revenue/ Ebitda/ PAT CAGR of 15.9%/ 17.5%/ 19.4% respectively over FY25-FY28E.
We maintain our Hold rating on DMart with a SOTP-based target price of Rs 4,055 (from Rs 3,982 earlier) based on 38x Sept 2027 EV/Ebitda (35% discount to long period average of 60x) for the offline business and 2x Sept 2027 EV/ sales for the online business.
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