Hold Avenue Supermarts; target of Rs 3923: Prabhudas Lilladher

Prabhudas Lilladher's research report on Avenue Supermarts

We cut our FY26/FY27 EPS estimates by 1.0%/1.9%, respectively, as we expect margin pressures to persist due to 1) Continued high competitive intensity driven by a consumer shift toward e-commerce and quick commerce platforms and 2) Accelerated store expansion in a subdued demand environment, softer gross margins, increased spending on customer service, and rising store-level wages, especially in metro areas. D’Mart’s Q1 results missed estimates, as intense competition and higher overheads weighed on margins. Operational metrics remained stable in Q1, with sales per store and sales per square foot growing 1.9%/1.5% YoY. The cost of retail increased by 50 basis points on higher overheads. GMA proportion stabilized with 24.7% contribution in 1Q vs 24.89% in Q1FY25. D’Mart might see competition from Ecom/ QC in non-apparel GMA as they are trying to increase their presence in higher margin non-grocery segments.

Outlook

We estimate 9.3% EPS growth in FY26 and 12.9% CAGR over FY25-27. We cut DCF based target price to Rs3923 (4063 earlier). We expect back ended returns given heightened competition in Food and Grocery retail. Maintain Hold.

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Avenue Supermarts - 14072025 - -prabhu