DMart's parent company, Avenue Supermarts Ltd., reported that its net profit remained unchanged in the first quarter of the financial year 2026, missing analysts' expectations significantly. The company's net profit was Rs 772.81 crore, slightly down by 0.1% from Rs 773.68 crore in the same quarter last year.

Brokerage firms have expressed concerns about DMart due to disappointing earnings on both revenue and margins during this period. Revenue grew by 16.3%, reaching Rs 16,359.7 crore, but it fell short of the expected Rs 16,583 crore. Earnings before interest, taxes, depreciation, and amortization (EBITDA) increased by 6% to Rs 1,299.04 crore but also did not meet forecasts.

The CEO mentioned that revenue growth was impacted by significant deflation in various staples and non-food products and noted that gross margins were lower compared to the previous year due to heightened competition within the fast-moving consumer goods (FMCG) sector. Increased operating costs were attributed to efforts aimed at improving service levels and inflation affecting entry-level wages.

Brokerages like Macquarie maintained an 'underperform' rating with a target price of Rs 3,100 per share, indicating a potential downside of about 23.7%. Morgan Stanley kept an 'underweight' rating with a revised target price of Rs 3,350 per share while highlighting risks associated with DMart's growth expectations.

JPMorgan maintained a 'neutral' stance with a target price of Rs 4,150 per share but anticipated near-term margin pressures due to increased competition in FMCG markets. Nuvama also retained a 'neutral' rating while cutting profit estimates for future years due to ongoing competitive trends impacting margins.

Overall, brokerages are cautious about DMart's performance amid intensifying competition and margin pressures within the retail sector.

Original article (macquarie) (jpmorgan)

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