Motilal Oswal Sets Target Price of Rs 5000 for Avenue Supermarts

Avenue Supermarts' Revenue Growth Trajectory Improves in 4QFY26

Avenue Supermarts, the parent company of DMart, has seen an improvement in its revenue growth trajectory, registering a 19% YoY growth in 4QFY26, compared to 15% YoY in 9MFY26. This growth can be attributed to the acceleration in store additions, with most of the additions being back-ended. Additionally, the recovery in Same Store Sales Growth (SSSG) is expected to contribute to the improved revenue growth, following a period of ~6% growth in the last few quarters.

The competitive intensity from Quick Commerce (QC) remains a challenge in the metros and tier 1 markets. However, the acceleration in store additions is seen as a key trigger for DMart to revert to a 20%+ YoY revenue growth trajectory. The execution on store openings improved significantly in FY26, with a total of 85 store openings, surpassing the street's expectations of ~60-65 stores. Of these 85 new stores, 46 were added in existing cities, while DMart entered 39 new cities, including 34 tier 2+ cities. The company also made its entry into five new states - UP, Haryana, Odisha, Uttarakhand, and Goa - in FY26.

DMart's Expansion Strategy

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The expansion strategy adopted by DMart, focusing on entering new cities and states, is expected to provide a boost to the company's revenue growth. Although the throughput in tier 2+ cities is likely to be lower than in existing cities, the cost structure is expected to be lower, thereby protecting returns. With a total of 85 store openings in FY26, DMart has demonstrated its ability to execute its expansion plans effectively.

Outlook

We reiterate our Buy rating on DMart with a revised Target Price (TP) of INR5,000, premised on 45x FY28 EV/EBITDA (implied ~80x FY28 P/E). This revised TP reflects our continued confidence in DMart's growth prospects and its ability to maintain its market leadership in the retail sector.

| Comparison of Revenue Growth Trajectory | | --- | --- | | Revenue Growth in 4QFY26 | 19% YoY | | Revenue Growth in 9MFY26 | 15% YoY | | Store Openings in FY26 | 85 | | Store Openings in FY25 | 50 | | Street's Expectations for Store Openings in FY26 | ~60-65 stores |

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline