Avenue Supermarts (DMART) Share Price Target at Rs 4,210: Axis Securities

Avenue Supermarts (DMART) Share Price Target at Rs 4,210: Axis Securities

Axis Securities has retained its BUY call on Avenue Supermarts, the operator of the D-Mart chain, but cut its target price to Rs 4,210 from Rs 4,845 after a September quarter in which sales held up and profits did not. Revenue rose 17.8% to Rs 19,644 crore, in line with the brokerage's estimate, as same-store growth at mature outlets accelerated to 9.5%. Higher wage, operating and interest costs, however, left EBITDA 9% and net profit 15% below forecast. Axis has trimmed FY27 and FY28 earnings estimates by up to 12%, yet still sees about 20% upside from the Oct. 9 price of Rs 3,520.

BUY RETAINEDQ2FY27 Result UpdateRetail

D-Mart's Shelves Stay Busy, but Costs Mark Down the Target

Footfall and same-store sales are moving in the right direction. Margins are not. Axis Securities keeps faith with the value retailer, with a lower price tag.

Avenue Supermarts · Axis target

Was Rs 4,845

Rs 4,210

Shelf price today (CMP, Oct. 9): Rs 3,520
Gap to target: about 20% upside

52-week range Rs 3,499 – Rs 4,642 · Basis: 65x Sep'28E EPS

DMART · NSE · MCAP RS 2,29,612 CR

The Quarter at the Checkout

The top line did what Axis expected. Consolidated revenue climbed 17.8% year on year to Rs 19,644 crore, within 0.6% of the house estimate, helped by firmer like-for-like sales and new stores. Everything below revenue, though, fell short. Gross margin slipped 15 basis points to 14.9% as cost of sales rose 18%, a touch faster than sales. EBITDA rose 14.8% to Rs 1,393 crore, but the margin narrowed to 7.1%, and net profit grew a modest 8.5% to Rs 743 crore.

Q2FY27 versus Axis estimate (Rs crore)

Item Q2FY26 Q2FY27 YoY Axis est. vs est.
Revenue 16,676 19,644 +17.8% 19,761 -0.6%
Gross profit 2,513 2,932 +16.7% 3,063 -4.3%
EBITDA 1,214 1,393 +14.8% 1,533 -9.1%
EBITDA margin 7.3% 7.1% -19 bps 7.8%* -67 bps*
Net profit 685 743 +8.5% 876 -15.2%
EPS (Rs) 10.5 11.4 +8.5% 13.5 -15.2%

*TopNews arithmetic from the house's printed EBITDA and revenue estimates; see the Editor's note below.

Costs Outran the Till

The squeeze becomes obvious when each cost line is lined up against sales growth. Every major expense grew faster than revenue. Employee costs rose 18.7%, which Axis singles out as elevated wage inflation, while depreciation jumped 25.4% on a bigger store base and interest cost almost doubled. Other income fell by nearly a third. The result is a profit line that ran at less than half the pace of the till.

The cost race: YoY growth by line, Q2FY27

Track runs 0% to 30%. Dashed line marks revenue growth of 17.8%.

Revenue

17.8%

Cost of sales

18.0%

Other expenses

18.3%

Employee costs

18.7%

Depreciation

25.4%

Interest
off the track ►

82.8%

EBITDA

14.8%

Net profit

8.5%

The Footprint Keeps Growing

Store counter, end-Q2FY27

518

15 stores added in the quarter.

Like-for-like, stores older than 24 months

Q2FY26 6.8%  →  Q2FY27 9.5%

More sales from the same shelves, the cleanest signal in the quarter.

For the rest of FY27, management's priorities are store productivity and an earnings recovery built on the everyday-low-cost, everyday-low-price (EDLC/EDLP) model. D-Mart is deepening its presence in key metropolitan markets while exiting seven low-contributing cities. Axis says the real margin lever is a revival in discretionary spending, which would lift the share of higher-margin general merchandise and apparel (GM&A) in the basket. Moving the D-Mart Ready e-commerce arm toward profitability is the other swing factor.

Estimates Marked Down

Citing macroeconomic uncertainty, Axis has cut its numbers. Revenue estimates fall only 1% for FY27 and 3% for FY28, but EBITDA drops 7% and 9%, and net profit 8% and 12%. In the chart below, the dashed outline is the old estimate and the solid bar is the new one, drawn to scale.

Old vs new estimates (Rs crore)

FY28E revenue: 97,705 → 95,247

FY27E EBITDA: 6,312 → 5,889

FY28E EBITDA: 7,734 → 7,005

FY27E net profit: 3,685 → 3,377

FY28E net profit: 4,350 → 3,826

Revised financial outlook (Rs crore)

Year to March FY26 FY27E FY28E FY29E
Net sales 68,821 80,695 95,247 1,12,358
EBITDA 5,187 5,889 7,005 8,263
EBITDA margin 7.5% 7.3% 7.4% 7.4%
Net profit 2,970 3,377 3,826 4,624
EPS (Rs) 45.6 51.9 58.8 71.1
P/E (x) 77.1 67.8 59.9 49.5
Return on equity 12.1% 12.1% 12.1% 12.7%

Even after the cuts, Axis models compound annual growth of 17% in revenue, 17% in EBITDA and 14% in net profit over FY25-29E. Free cash flow, slightly negative in FY26 after Rs 5,122 crore of capital spending, is projected to turn positive at Rs 707 crore in FY27E.

How the Rs 4,210 Price Tag Is Built

65x
target P/E (was 68x)

×
~Rs 65
Sep'28E EPS*

=
Rs 4,210
target, 20% upside

Axis now values the stock at 65 times September 2028 estimated earnings, down from 68 times June 2028 earnings, and the lower multiple combined with smaller earnings explains the 13% cut in the target. The stock trades at Rs 3,520, barely above its 52-week low of Rs 3,499 and about a quarter below the high of Rs 4,642. That weakness creates most of the upside Axis sees. At about 68 times FY27E earnings, though, D-Mart is still a premium-priced compounder, so investors may prefer to build positions gradually rather than all at once.

*Axis does not print a Sep'28E EPS. The figure is TopNews arithmetic: the midpoint of FY28E (Rs 58.8) and FY29E (Rs 71.1) EPS, which reconciles with the printed target.

Editor's note

The margin rows of the report's results table do not add up. The gross-margin row omits the Axis estimate. The variance column prints 1,493 bps for gross margin, 709 bps for EBITDA margin and -27,789 bps for PAT margin, and the PAT-margin estimate is shown as 282. These look like column-shift errors. Based on the house's own revenue and profit estimates, the implied estimates are about 15.5% gross margin, 7.8% EBITDA margin and 4.4% PAT margin. That means actual results missed by roughly 57, 67 and 65 bps. TopNews uses these recomputed figures. The absolute rupee numbers in the table are internally consistent.

What Could Spoil the Basket

Risks flagged by Axis Securities

Demand disappointment: the expected consumer recovery and a strong festive season may not materialize.

Cost inflation: higher input and wage costs could erode margins further.

Interest rates: further rate increases would weigh on urban consumption.

Wider pressures: the report also cites a below-normal monsoon outlook, price competition in staples, aggressive value-retail rivals, slower store openings and geopolitical uncertainty.

Levels at a glance: Avenue Supermarts (D-Mart) | Axis Securities BUY (retained) | CMP Rs 3,520 (Oct. 9) | Target Rs 4,210 (from Rs 4,845) | Upside ~20% | 52-week range Rs 3,499 - Rs 4,642 | Basis: 65x Sep'28E EPS

Sources

Axis Securities, "Avenue Supermarts Ltd. Result Update: Strong LFL growth; Cost Inflation Hit Profitability," Oct. 12, 2026 (CMP as of Oct. 9, 2026). Research analyst: Suhanee Shome; research associate: Urmi Shah. Market data: Ace Equity, as cited in the report. The shelf-label, cost-race and old-vs-new estimate charts are re-plotted by TopNews from the house's own figures; derived values are marked as TopNews arithmetic.

Investments in the securities market are subject to market risks. Read all related documents carefully before investing. This TopNews report is for information only and is not investment advice.

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