DMart shares tank 4%: Rs 3,214 or Rs 5,723? Bernstein, JPMorgan, HSBC, Goldman Sachs targets

The Radhakishan Damani-led Avenue Supermarts Ltd (DMart) has received a mix of ‘Reduce’, ‘Neutral’ and ‘Hold’ ratings from several global brokerages following its September quarter results, which they described as a margin shocker after three consecutive quarters of improvement, citing an adverse product mix, subdued store-level productivity and higher operating costs.

JPMorgan has a ‘Neutral’ rating on the stock with a target price of Rs 3,925, while HSBC has a ‘Reduce’ rating with a target of Rs 3,340. Jefferies has a ‘Hold’ rating with a target of Rs 4,000. UBS suggested 'Buy' with a target of Rs 4,500 and Goldman Sachs suggested a target of Rs 3,500. Bernstein sees DMart at Rs 5,000.

PL Capital has the lowest target price among the brokerages at Rs 3,214, while CLSA has the highest at Rs 5,723, according to Bloomberg data compiled by Business Today.

Jefferies said a strong traffic, higher inflation & one of the best like-for-like (LFL) prints in recent quarter  highlighted healthy demand during Q2, but profitability disappointed.

"Higher food mix, weaker GM, wage inflation & inventory build weighed on earnings & Operating cash flow. Store expansion remained modest, but productivity softened, as Ebitda for Q2. We cut EPS by 2-3 per cent, revise PT lower to Rs 4,000. We believe the stock is likely to trade down in reaction to Q2 miss," the global investment bank said ahead of Monday's trading session.

Margin has faced renewed pressure after three quarters of gain, Nuvama Institutional Equities said. It recalled  that the 3.5-years of continuous profit compression served as the key driver behind the stock's sharp multiple de-rating. "Maintain ‘HOLD’ with a revised TP of INR3,784 (earlier Rs 4,174). Stock trades at 62x/53x FY28E/29E EPS," it said.

Systematix said Same store sales growth (SSSG) for stores operational for two years or more improved to 9.5 per cent in Q2 from 6.8 per cent YoY, indicating an improvement in underlying sales momentum at comparable stores.

"However, this did not translate into a commensurate improvement in overall profitability, reflecting the impact of lower-margin sales, operating cost pressures and the gradual ramp-up of the expanded store base," it said.

This brokerage suggested 'Hold' and a target of Rs 3,520 as it expects the company’s Q3 revenue growth to be higher compared to Q2, supported by the full-quarter benefit of inflation, a lower base in 3QFY26 (13.2 per cent YoY) due to the GST transition impact, and higher store additions. Revenue growth should also benefit from the shift of festivities in 3QFY27, it said.

Meanwhile, CLSA has maintained high convition 'Outperform' with an unchanged target price of Rs 5,723.  "The strong LFL growth demonstrates that DMart's value proposition continues to resonate with consumers, particularly in an inflationary environment. We also expect store additions to remain robust.
Combined with rising private-label penetration, which should strengthen customer stickiness and reinforce DMart's value positioning, we believe the DMart can deliver healthy growth over the long term despite near-term fluctuations," it said.