Avenue Supermarts shares gain after Q3 EBITDA surprise; CLSA raises target

Shares of Avenue Supermarts, the operator of the D-Mart retail chain, were trading with gains of up to 3% on Monday, January 12, after the company delivered a margin-led surprise in the December quarter.

D-Mart reported EBITDA growth of over 20%, sharply ahead of analyst expectations of 8-10%.

Consolidated EBITDA margins improved to 8.1% in Q3FY26 from 7.6% a year ago, aided by an expansion in gross margins to 15.3% compared with 14.7% in the same period last year.

EBITDA increased 20.2% to ₹1,463.37 crore, while profit after tax grew 18.3% to ₹855.78 crore from ₹723.54 crore in Q3FY25.

On a year-on-year basis, consolidated revenue rose 13.3% to ₹18,100.88 crore from ₹15,972.55 crore. Management said revenue growth during the quarter was partly impacted by deflation in staples.

Sales per square foot stood at ₹9,290 versus ₹9,317 a year ago, while like-for-like growth for the quarter came in at 5.6%.

The company continued to expand its store network, ending the quarter with 442 stores. Avenue Supermarts added 10 stores during Q3, taking total additions to 27 stores in the first nine months of the financial year.

Here's what brokerages have to say

CLSA has reiterated its 'High Conviction Outperform' rating on the stock and raised its price target to ₹6,185 per share.

The brokerage continues to remain positive and has increased its FY26-28 consolidated earnings estimates by 1% to 7% to factor in stronger profit growth.

Citi, however, maintains a 'Sell' rating with a price target of ₹3,150.

The brokerage sees risks to the sustainability of the recent margin expansion, citing that the improvement in gross margins may have been driven by one off factors such as additional discounts or margins offered by FMCG companies to liquidate inventory around GST rate changes.

Citi also believes DMart may be rationalising its discounting strategy under the new management to prioritise profitability amid slowing same store growth, driven by rising competition from quick commerce.

It pointed out that profit growth has lagged revenue growth in 10 of the last 12 quarters, largely due to competitive pressures and cost inflation.

Nuvama maintains a 'Hold' rating, with a price target of ₹4,351.

The brokerage said the sharper growth in profit is largely a result of higher gross margins, which it expects to be driven by reduced discounting following GST rate cuts.

Nuvama said that DMart Ready's implied growth of around 20% on-year has revived sequentially, returning to a 20% plus trend. However, factoring in the slower growth run rate and a sharper focus on margins, the brokerage has tweaked its FY26E and FY27E estimates, cutting revenue and profit assumptions in some years while upgrading near term profitability forecasts.

Out of the 29 analysts that have coverage on Avenue Supermarts, eight of them have a 'Sell' rating on the stock, nine of them say 'Buy', while the other 12 have a 'Hold' rating.

Shares of Avenue Supermarts ended 0.45% higher on Friday at ₹3,807. The stock is up 1.2% so far for the year.