Prabhudas Lilladher has issued a hold rating on Avenue Supermarts with a target price of ₹4000 in its research report dated July 28, 2026. According to the brokerage's analysis, the recommendation reflects concerns about the company's competitive positioning and growth prospects in the evolving retail landscape.
The brokerage's cautious stance is driven by sustained competitive intensity from quick-commerce players across metro markets, as reported by Prabhudas Lilladher. The company faces little scope of margin expansion amid rising wage inflation and an adverse sales mix, while continuously narrowing pricing moat versus quick-commerce players poses significant challenges to its competitive position.
While D-Mart is focusing on modern trade, Prabhudas Lilladher believes that rising scale of quick-commerce and fast changing consumer preferences pose major risks to growth. The brokerage notes that D-Mart Ready, its attempt at e-commerce, has lost steam over the past couple of years, adding to the company's strategic challenges.
D-Mart incurred capex of ₹41 billion in FY26 (versus ₹13 billion in FY20), and Prabhudas Lilladher expects this to increase further to ~₹43 billion by FY29. The elevated investments, coupled with margin dilution and unfavorable mix, have resulted in ROE declining to ~13% in FY26 from ~16% in FY23. The brokerage sees limited scope for ROE improvement over the medium term as incremental capex will remain higher than internal cash generation.
Despite challenges, Prabhudas Lilladher expects EBITDA growth to recover to double digits from 2QFY27 aided by favorable base effects. The brokerage factors in 15-16% bill cuts growth, ~2% average bill value growth and ~20bps EBITDA margin contraction over FY26-28, translating into a 14.4% EPS CAGR. However, the company's steep valuation of 65x FY28E EPS limits scope for re-rating over the medium term, according to the report.
