Emkay Global has maintained its sell recommendation for Avenue Supermarts (DMart) with an unchanged target price of ₹3,700. According to the latest reports, the broker values the stock at 54x FY28E EPS, citing concerns about slow TAM expansion, fading USP of value/assortment versus competitors, deteriorating ROIC, and expensive valuation at ~80x 1Y forward PE. The current market price stands at ₹3,711.95, indicating a minimal premium to the target.
Q4 was a healthy but in-line quarter with 23-25% EBITDA/PBT growth, driven by 11% like-for-like (LFL) growth (vs ~7% in 9M), accelerated store expansion, and EBITDA margin gain of ~40bps to 7.2%. However, DMart attributed the LFL uplift to a spike in consumer buying in March 2026 amid geopolitical tensions, which normalized toward Q4 end. The company added 58 new stores during the quarter (85 in FY26), taking total store count to 500 spread across 20.6mn sqft. Q4 standalone revenue grew ~19% YoY, led by 10.8% LFL growth and store additions, with average bill value (ABV) increasing 5% vs ~2% in 9M.
DMart shares experienced significant volatility with a 3% decline following the sale of a 1.06% equity stake worth approximately ₹2,600 crore in a block deal. According to latest market reports, the stock has shown mixed performance with 2.09% gains to ₹3,981.70 amid robust financial performance. The company maintains a market capitalization of ₹242,636 crore with strong fundamentals supporting its retail operations across multiple product categories including food, garments, toys, stationery, footwear, and beauty products.
The competitive environment presents mixed signals for DMart's positioning. According to media reports, Zepto has reduced discounting activities, while Amazon Now continues aggressive cashback offerings. Flipkart Minutes is gaining traction in tier-2+ towns, and Blinkit maintains its leadership position through focused initiatives around experience, assortment, and accessibility. The broker expects an additional 2-3% benefit for retailers like DMart due to GST reduction implemented in September 2025.
DMart has underperformed significantly, declining 20% over the last 12 months, as reported by The Hindu BusinessLine. The company reported negative free cash flow of ~₹4bn in FY26, driven by aggressive expansion with 85 store additions and total capex of ~₹40bn. Net subsidiary revenue grew ~18% while losses increased ~10% to ₹2.4bn in FY26. Despite strong brand recall, the broker identifies concerns about the company's slow expansion in terms of categories (covering only 50% of India retail TAM), consumer cohorts (focused on low/mid income segments), and sales channels (primarily physical stores).
