DMart Q2 Results Review: Analysts Reiterate Concerns Over Sluggish Growth

Avenue Supermarts Ltd. posted a 5.8% year-on-year rise in net profit for the second quarter, missing analysts' expectations and reinforcing pre-result concerns from brokerages.

Slow growth in store additions and increased competition from quick commerce players like Blinkit continue to weigh on its performance, according to analysts.

Despite revenue growth of 14.4% year-on-year to Rs 14,444.50 crore, the DMart parent fell short of analysts' Rs 14,597 crore revenue forecast. Net profit for the quarter stood at Rs 659.44 crore, below the Rs 812 crore estimate by Bloomberg-tracked analysts.

As quick commerce continues to grow, Avenue Supermarts faces mounting pressure to compete in this space. Analysts suggest that the company must accelerate store additions and enhance its digital grocery offerings (DMart Ready) to keep pace with competitors like Blinkit. 

CEO Neville Noronha acknowledged the growing impact of online grocery formats and DMart Ready on large metro stores, with store productivity being hit by online competition.

Ahead of the earnings release, five major brokerages—Morgan Stanley, Bernstein, Goldman Sachs, JPMorgan, and Macquarie—had flagged slower store additions and intensified competition from quick commerce players as key challenges hampering DMart’s growth.

• Net Profit: Rs 659.44 crore, up 5.8% YoY (estimate: Rs 812 crore)

• Revenue: Rs 14,444.50 crore, up 14.4% YoY (estimate: Rs 14,597 crore)

• EBITDA: Rs 1,093.77 crore, up 8.8% YoY

• EBITDA Margin: 7.6%, down from 8% last year (estimate: 8.3%)

Morgan Stanley

• Downgrades stock to 'underweight' with a target price of Rs 3,702 apiece, implying a potential downside of 19%. 

• Online grocery formats affecting like-for-like growth, casting doubt on 20% top-line growth.  

• Slow response to market changes toward convenience is hurting the business.  

• Slower store expansion further impacting growth.  

• Lowers fiscal year 2025-2027 top-line growth estimates to 17-18% from 23-24%.  

Bernstein 

• Rates 'outperform' with a target price of Rs 5,800, implying an upside of 27%.  

• One quarter of weak results does not indicate a shift in DMart’s long-term story.  

• High store opening potential in both new and existing clusters.  

• Value-seeking customers will remain the primary driver of purchases in India.  

• Short-term growth may face continued pressure.  

JP Morgan

• The stock has been downgraded to 'neutral' from 'overweight', according to Bloomberg. 

• Target price set at Rs 4,700, implying an upside of 2.8%.

Macquarie 

• Has an 'outperform' with a target price of Rs 5,600 per share, implying an upside of 22.5% from the previous close. 

• The second quarter is a miss. Quick commerce concerns cited.  

• Did not like management comment on seeing impact of online grocery format. 

• Did not like steady moderation in same-store sales growth.  

• Liked marginal improvement in general merchandise.

Citi

• Maintain 'sell' rating with a target price of Rs 3,500, implying a downside of 23%. 

• EBITDA/PBT growth has lagged behind revenue growth in seven out of eight quarters. 

• Cut FY25-27 EPS estimates by 4-6%. 

• Valuations at 82x FY26E P/E pose risk.

Nuvama

• Retain a 'hold' rating with a revised target price of Rs 5,040, implying a potential upside of 10%. 

• Weak September quarter attributed to lower store productivity. 

• DMart Ready’s growth slowed to 22% YoY in first half of FY25 (down from 32% in FY24)

• Forecasts 45 new stores in the current fiscal.

CLSA

• Rates 'outperform' and cuts target price to Rs 5,360 apiece from Rs 5,650 apiece.  

• Reduces fiscal 2025-2027 estimates by 13-15%.  

• Believes the pivot to private labels will help DMart compete effectively in the future.  

• DMart’s low-cost model remains largely unchallenged in the medium term.  

• Confident in DMart’s long-term store growth and optimistic about quick commerce prospects.

Motilal Oswal

• Reiterate 'buy' rating with a target price of Rs 5,300, implying a potential upside of 13.7%. 

• Expect a 17% revenue and 20% PAT CAGR over fiscal 2024 to 2027. 

• Weaker store productivity offset by higher gross margin. 

• Store additions expected to pick up pace in second half of the fiscal.

Shares of the company closed 0.76% lower at Rs 4,572.7 per share, compared to a 0.14% decline in the NSE Nifty 50. The stock has risen 18.38% year-to-date and 12% over the past 12 months.