Avenue Supermarts Q2 Results Review - Initial Signs Of Ceding Share To Quick Commerce Visible: HDFC Securities

HDFC Securities Institutional Equities

Avenue Supermarts Ltd.’s Q2 performance indicates initial signs of D-Mart ceding market share to quick commerce players (especially in large metro cities).

Revenue grew 14.2% to Rs 140.5 billion in Q2 (our estimate: Rs 142 billion). H1/Q2 FY25 same-store sales growth stood at 7.4/5.5% respectively and sales density was broadly stable YoY at Rs 35.6k/sq ft annualised).

While general merchandise and apparel salience marginally improved to 23.45% of sales for H1 FY25 (versus 23.21% for H1 FY24) it remains meaningfully lower versus pre-pandemic times.

Ebitdam contracted 27bps YoY to 7.9% (our estimate: 8.4%) despite stable gross margin (14.2%). We suspect the Ebitda miss could’ve been due to expansion-led front-loading of costs.

Note: Cost of retailing remained elevated at 6.3% (versus 5.8% in Q2 FY25). We marginally cut our FY26/27 EPS estimates by 2% each to account for an increase in cost structure and maintain our Sell rating with a DCF-based target price of Rs 3,800/share, implying 59 times Sep-26 price/earning.

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