Axis Securities has reiterated a BUY call on Avenue Supermarts Limited, setting a target price of Rs 5,270, implying a potential upside of approximately 15% from current levels. Avenue Supermarts, the operator of DMart, delivered a resilient Q4FY26 performance, with revenue growth of nearly 19% year-on-year, supported by aggressive store additions and stable operational execution. While like-for-like (LFL) growth remained subdued at 8.1% for the full year, margin expansion and profitability outperformance stood out. EBITDA margins improved to 6.8%, and PAT rose 19.4% YoY. Looking ahead, the company’s focus on improving store productivity, reviving higher-margin segments like General Merchandise & Apparel (GM&A), and disciplined expansion positions it for steady earnings recovery, even as demand recovery remains gradual.

Strong Revenue Growth Driven by Store Expansion

Expansion remains the cornerstone of DMart’s growth strategy. The company reported Q4FY26 revenue of Rs 17,684 Cr, marking a robust 18.9% YoY increase. A key driver was the addition of 58 stores during the quarter, taking the total store count to 500.

Mature store performance remained stable but not exceptional. Stores older than two years delivered growth of 10.8%, while full-year LFL growth came in at 8.1%, reflecting lingering demand softness.

Temporary consumption spikes masked underlying trends. Management highlighted a short-lived demand surge in March due to geopolitical factors, which normalized toward month-end—suggesting that consumption recovery remains uneven.

Margins Expand as Cost Efficiencies Improve

Profitability was the standout metric this quarter. EBITDA rose 26.7% YoY to Rs 1,211 Cr, surpassing expectations, with margins expanding 42 basis points to 6.8%.

Gross margin stability provided a strong base. Gross margins held steady at 14.6%, supported by better product mix and operational efficiencies.

Bottom-line growth remained healthy. PAT came in at Rs 656 Cr, up 19.4% YoY, reflecting disciplined cost management and operating leverage benefits.

Detailed Quarterly Financial Performance

The earnings beat was primarily margin-led rather than volume-driven.

Strategic Priorities: Productivity, Mix Improvement, and Controlled Expansion

Focus is shifting from expansion alone to productivity enhancement. Management is prioritizing improving store-level efficiency and profitability.

GM&A recovery is critical. The General Merchandise & Apparel segment—typically higher margin—has underperformed, but leadership changes and targeted strategies are expected to drive recovery in FY27.

Disciplined store rollout continues. The company plans ~15% store additions on its current base, balancing growth with return ratios rather than chasing aggressive expansion.

DMart Ready recalibration underway. Efforts are being made to optimize the e-commerce arm for profitability rather than scale at any cost.

Outlook: Gradual Recovery Supported by Macro Stability

Consumption recovery remains gradual but improving. Stabilizing macroeconomic conditions and GST-related benefits are expected to support volume growth.

Higher-margin categories hold the key to earnings acceleration. A revival in discretionary demand could significantly lift profitability given the margin profile of GM&A.

Management execution remains consistent. DMart continues to demonstrate disciplined operational execution, which is critical in a competitive value retail landscape.

Financial Projections and Growth Trajectory

The company is expected to deliver a CAGR of 19% in revenue, 24% in EBITDA, and 22% in PAT over FY25–FY28E.

Valuation: Premium Justified by Execution Strength

The stock trades at elevated multiples. At current levels, Avenue Supermarts is valued at approximately 70x Mar’28 EPS.

Premium valuation reflects consistency. Investors continue to assign a premium due to DMart’s predictable execution, strong return ratios, and scalable business model.

Target Price: Rs 5,270
Current Market Price: Rs 4,591
Upside Potential: ~15%

Risks to Watch

Demand recovery uncertainty. A slower-than-expected pickup in consumption could weigh on growth.

Margin pressure in staples. Persistent pricing competition in essential categories may limit margin expansion.

Rising competitive intensity. The value retail segment is witnessing increasing competition, which could impact market share and pricing power.

Investment Verdict: BUY with Measured Optimism

Avenue Supermarts remains a structurally strong retail story. Its disciplined expansion, consistent execution, and improving margin profile underpin long-term growth visibility.

Near-term challenges are manageable. While LFL growth softness and demand volatility persist, strategic initiatives—particularly in GM&A—offer a clear path to recovery.

For long-term investors, the risk-reward remains favorable. With a target price of Rs 5,270 and a 15% upside, the stock continues to merit a BUY rating, especially for investors seeking exposure to India’s organized retail growth story.