DMart Share Price Declines Following Emkay Global's 'Sell' Rating

Avenue Supermarts Share Price Declines Over 2% Amid Indian Stock Market Crash

On Monday, Avenue Supermarts, the parent company of D-Mart retail chain operator, witnessed a decline in its share price of over 2% after Emkay Global Financial Services initiated coverage on the stock with a bearish view. The shares of Avenue Supermarts dropped as much as 2.69% to ₹4,281.65 apiece on the BSE, amidst a broader Indian stock market crash.

The benchmark indices, Sensex and Nifty 50, traded over 1.5% lower each on weak global market cues. Emkay Global Financial Services initiated coverage on the stock with a 'Sell' rating, citing Avenue Supermarts' slow expansion of the Total Addressable Market (TAM). The brokerage firm has set a share price target of ₹3,700 apiece, implying a downside potential of nearly 16% from Friday's closing price.

Avenue Supermarts has a strong brand value, but it has been slow to expand the TAM. According to Emkay Global Financial Services, DMart has a low 1.5% market share and caters to only ~50% of the Indian retail TAM, whereas Walmart has a 7-8% share and ~100% US retail market TAM.

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The Indian consumer is embracing convenience, with quick commerce (QC) shares already at 1.5x of modern trade in key metros and QC now deepening presence in the next 50-100 cities. Emkay Global Financial Services' pricing analysis of the monthly basket indicates that the QC players are increasingly focusing on value and product assortment, following their success in delivering unmatched convenience.

The brokerage firm does not anticipate any meaningful recovery in same-store growth (SSG) for DMart, aside from seasonal fluctuations and potential price hikes by brands. Additionally, DMart's capex per store has increased by approximately 60%, resulting in a ~600 basis point decline in RoIC to around 13% over FY23–26E.

While the ace investor Radhakishan Damani-led company has executed effectively on store expansion and the rollout of private labels, its valuation at ~70x one-year forward P/E already factors in sustained improvement in these metrics, underpinning the brokerage's cautious stance on the stock.

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Emkay Global Financial Services' estimates assume a 19% EBITDA CAGR over FY25–35E, supported by 6.0–7.5% SSG growth, around 13% annual store expansion, and an estimated ~200 basis point improvement in margins.

DMart share price has gained over 13% in one month and has rallied 17% on a year-to-date (YTD) basis. The stock has risen 5.5% in one year, but has fallen 9% in two years. DMart shares have surged 54% over the past five years. At 10:20 AM, DMart share price were trading 1.15% lower at ₹4,349.40 apiece on the BSE.