DMart shares to remain range-bound post mixed Q3 updates: Centrum Broking

Centrum Broking said Avenue Supermarts’ December quarter business update was mixed, with sequential moderation in revenue growth continuing even as store additions remained healthy. The brokerage said the company’s revenue growth slowed to 13.2 per cent year on year in Q3 FY26 from 16.2 per cent in Q1 FY26 and 15.4 per cent in Q2 FY26. It attributed the moderation in growth to increased competitive intensity from quick commerce players, deflation in staples and non-food categories, and lower maximum retail prices following GST rate cuts.

Centrum said revenue per store is estimated to have declined 1.1 per cent YoY during the quarter. The brokerage said the stock is likely to remain range-bound in the near to medium term and maintained a 'Neutral' rating on Avenue Supermarts Ltd. It retained a target price of Rs 4,000 apiece, based on a target EV-to-Ebitda multiple of 40 times on September 2027 estimates.

On store expansion, Centrum said Avenue Supermarts added 10 stores in Q3 FY26, taking the total store count to 442, up 14.2 per cent year on year. Store additions for the first nine months of FY26 stood at 27, compared with 22 in the same period last year. The brokerage said this was in line with historical trends, where store openings are typically back-ended in the March quarter, and added that the company was likely to open about 57 stores in FY26.

Centrum said margin pressure is expected to persist, driven by higher discounting to counter competition, elevated operating expenses and an adverse change in business mix. For Q3 FY26, the brokerage estimated revenue, Ebitda and adjusted profit growth of 13.2 per cent, 9.8 per cent and 7.2 per cent, respectively, on a year-on-year basis. Gross margin and Ebitda margin were estimated to have contracted 10 basis points and 20 basis points year on year to 14.0 per cent and 7.7 per cent, respectively.

Over the medium term, Centrum said it built a revenue and adjusted profit compound annual growth rate of 16.1 per cent and 14.7 per cent, respectively, over FY25 to FY28. However, it flagged downside risks to earnings estimates due to weak topline growth and margin pressures.