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Avenue Supermarts, which operates the DMart retail chain, saw shares fall over 3% at the market open on Monday, May 4, 2026. This happened despite strong Q4 FY26 results: net profit rose 19% year-over-year to ₹656.6 crore, and revenue hit ₹17,684 crore. The company also opened 58 stores in the quarter, surpassing 500 stores nationwide. FY26 saw a record 85 store additions, its highest ever.
Growth and Expansion Drive
These Q4 FY26 results mark a turnaround for Avenue Supermarts. Profit before tax margins grew to 6.85% from 6.42% a year earlier, reversing a trend of margin declines seen over the past thirteen quarters. This margin improvement, along with faster store openings, is a key growth driver. For the full FY26, revenue climbed 15.9% to ₹66,968 crore, and net profit increased 10.1% to ₹3,224 crore. The company's strategy of value retail and efficient store operations in smaller towns is paying off operationally, drawing investor attention to its long-term expansion.
Valuation Concerns Amidst Competition
Despite strong operations, the market reaction highlights ongoing worries about Avenue Supermarts' valuation and increasing competition. Its Trailing Twelve Months (TTM) Price-to-Earnings (P/E) ratio is around 101x, much higher than competitors. Reliance Retail has a TTM P/E of about 22-23x, and Tata Consumer Products trades at roughly 70-77x. This large valuation gap prompted Emkay Global Financial Services to keep a 'Sell' rating and a ₹3,700 target price. Emkay cited slow market expansion, declining unique selling points against quick commerce (QC), weaker Return on Invested Capital (ROIC), and the high valuation. Quick commerce threatens DMart's value model by offering convenience. This directly challenges DMart, even as it tries to stay competitive.
Divergent Analyst Views and Risks
Cautious market sentiment is amplified by differing analyst views. Motilal Oswal Financial Services reiterated 'Buy' with a higher target of ₹5,200, citing margin recovery. Nuvama Institutional Equities kept a 'Hold' rating but raised its target to ₹4,975. This mix of views shows analysts balancing the company's operational strengths against potential risks. The average 12-month analyst price target from 30 analysts is ₹4,396.77, suggesting a potential downside of about 4.12% from current levels. Key risks include sustained consumer demand amid global tensions and aggressive quick commerce expansion, which could hurt margins and market share, especially in cities. The company's RSI (14) usually stays neutral, reflecting mixed sentiment, though some short-term indicators suggest it might be overbought.
Analyst Outlook and Future Projections
Looking ahead, analysts expect Avenue Supermarts' revenue to keep growing, driven by its fast store additions. Estimates suggest topline growth could reach around 19% in FY27E. However, higher associated costs might limit profit growth to about 16% in FY27E. India's retail sector is rebounding, with consumer discretionary companies expecting strong Q4 FY26 results and better margins. Apparel retailers, particularly in value fashion, are also growing, boosted by higher same-store sales and expansion. Despite these positives, Avenue Supermarts must justify its high valuation in a tougher market. Motilal Oswal remains optimistic, forecasting 19% annual growth for revenue and 20% for EBITDA from FY26 to FY28, backed by its expansion plans.