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DMart Q3FY26 Results: Strong Margin Surprise, But Valuation Debate Continues
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Summary
- DMart reported over 20% EBITDA growth, far above street estimates
- Margin expansion drove profit growth despite modest revenue growth
- Brokerages remain split, citing sustainability concerns
- Store expansion and DMart Ready performance remain key focus areas
DMart Q3FY26 Results: Strong Margin Surprise, But Valuation Debate Continues
Avenue Supermarts, the operator of the popular DMart retail chain, delivered a strong operational performance in Q3FY26, surprising the Street with significantly higher-than-expected profitability. While revenue growth remained moderate, sharp improvement in margins helped the company report robust growth in EBITDA and profit, triggering mixed reactions from brokerages.
The results highlight a critical shift in DMart’s near-term narrative from pure growth to profitability and margin discipline.
Key Highlights from DMart Q3FY26 Earnings
DMart’s third-quarter performance reflected resilience in a challenging consumption environment, especially amid deflation in staples.
Financial Performance Snapshot
- Revenue rose 13.3% year-on-year to ₹18,100.88 crore
- EBITDA increased 20.2% to ₹1,463.37 crore
- Profit after tax grew 18.3% to ₹855.78 crore
- EBITDA margin expanded to 8.1%, up from 7.6% last year
- Gross margin improved to 15.3% from 14.7%
The EBITDA growth came in sharply ahead of analyst expectations of 8 to 10 percent, marking a clear operational beat.
What Drove the Margin Expansion?
The standout feature of the quarter was the improvement in margins.
Gross Margin Gains
Management attributed the margin expansion to better sourcing efficiencies and changes in discounting strategies. Reduced price competition in certain categories and benefits from GST rate adjustments also supported gross margins.
Focus on Profitability
Under the current management approach, DMart appears to be prioritising profit stability over aggressive discounting, especially as competition intensifies from quick commerce players.
However, this shift has also raised questions about sustainability, particularly in a price-sensitive retail market like India.
Store Expansion and Operating Metrics
DMart continued its steady store expansion strategy.
- Total stores stood at 442 at the end of Q3FY26
- 10 stores added during the quarter
- 27 stores added in the first nine months of FY26
Sales Metrics
- Sales per square foot stood at ₹9,290 compared to ₹9,317 last year
- Like-for-like growth came in at 5.6%
While these metrics reflect stable performance, they also point to moderating same-store growth, a concern flagged by several brokerages.
DMart Ready and E-commerce Push
DMart Ready, the company’s online grocery platform, showed signs of revival.
Brokerage estimates suggest around 20% year-on-year growth, marking a return to a healthier trajectory after a period of muted performance. This is encouraging, especially as competition from quick commerce platforms continues to intensify.
That said, analysts remain cautious about long-term scalability and margin impact in the online segment.
What Brokerages Are Saying About DMart
CLSA: Bullish on Profit Momentum
CLSA reiterated its High Conviction Outperform rating and raised its price target to ₹6,185. The brokerage increased its FY26 to FY28 earnings estimates by up to 7 percent, citing stronger-than-expected profitability and operational efficiency.
Citi: Margin Sustainability a Key Risk
Citi maintained a Sell rating with a price target of ₹3,150. It flagged concerns that the margin expansion could be driven by one-off factors such as inventory liquidation by FMCG companies ahead of GST changes.
Citi also highlighted that DMart’s profit growth has lagged revenue growth in most quarters over the past three years due to competitive pressures and rising costs.
Nuvama: Balanced View
Nuvama retained a Hold rating with a target price of ₹4,351. While it acknowledged the near-term margin improvement, the brokerage remains cautious on long-term growth, trimming revenue assumptions while upgrading near-term profitability forecasts.
Analyst Consensus Snapshot
Out of 29 analysts tracking Avenue Supermarts:
- 9 have a Buy rating
- 12 recommend Hold
- 8 maintain a Sell rating
This split reflects the broader debate between earnings visibility versus valuation comfort.
Stock Market Reaction
Shares of Avenue Supermarts ended 0.45% higher at ₹3,807 following the results. The stock is up 1.2% year-to-date, underperforming broader market benchmarks, reflecting investor caution despite strong earnings.
What This Means for Indian Investors
For long-term investors, DMart remains a high-quality retail franchise with strong execution and balance sheet discipline. However, current valuations already price in a significant portion of future growth.
Short-term performance will likely hinge on:
- Sustainability of margin expansion
- Same-store sales growth trends
- Competitive intensity from quick commerce
- Store expansion pace
SEBI’s disclosure norms ensure transparency, but investors must still evaluate whether recent margin gains are cyclical or structural.
Why Research-Driven Investing Matters
In stocks like DMart, where fundamentals are strong but valuations are debated, research-backed decision-making becomes critical. Understanding earnings quality, margin drivers, and long-term competitive positioning helps investors avoid emotional reactions to headline numbers.
Platforms offering in-depth research and professional guidance can significantly improve investment outcomes in such cases.
How Swastika Investmart Helps Investors Stay Ahead
Swastika Investmart supports investors with:
- SEBI registered and compliant advisory framework
- Fundamental and technical research coverage
- Earnings analysis and sector insights
- Advanced trading platforms and responsive support
- Continuous investor education initiatives
Such support enables investors to interpret results beyond surface-level numbers.
Frequently Asked Questions
Did DMart beat expectations in Q3FY26?
Yes, EBITDA growth of over 20% was significantly higher than analyst estimates of 8 to 10 percent.
Why are brokerages divided on DMart?
While profitability improved, concerns remain about margin sustainability and slowing same-store growth.
Is DMart Ready showing improvement?
Yes, DMart Ready reported an implied growth of around 20% year-on-year, indicating a revival.
Is DMart a long-term investment?
DMart remains a strong business, but current valuations and competitive pressures warrant a cautious, research-driven approach.
Conclusion
DMart’s Q3FY26 results highlight a strong profitability surprise, driven by margin expansion and disciplined execution. However, sustainability of these gains remains the key question, as reflected in mixed brokerage views.
For investors, this is a stock that demands careful analysis rather than blind optimism.
If you are looking to invest with clarity, supported by strong research and expert insights, consider starting your journey with Swastika Investmart.
In markets, informed decisions always outperform noise.
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