Avenue Supermarts falls 4% post Q4FY26 on QC risk

Stock slides after Q4 numbers

Avenue Supermarts, the operator of DMart, fell sharply after announcing its Q4FY26 performance. The stock slipped 4.2% on the BSE and hit an intra-day low of ₹4,395 per share. At 9:21 AM, it was trading 3.65% lower at ₹4,423. The broader market was weaker too, with the BSE Sensex down 0.86% at 77,580.88.

The immediate trigger was not the headline growth alone, but how brokerages interpreted the quarter. Several analysts pointed to a tougher competitive backdrop, particularly from quick commerce (QC). Others highlighted valuations that they see as demanding relative to near-term growth visibility.

Q4FY26 earnings: profit and revenue up 19%

The company reported its Q4FY26 numbers on Saturday. In the March quarter, Avenue Supermarts reported net profit of ₹656.59 crore, up 19% year-on-year from ₹550.9 crore. Revenue for the quarter rose 19% to ₹17,683.86 crore from ₹14,871.86 crore.

While the quarter was described as healthy by some analysts, views diverged on what is driving the growth and whether it is sustainable at the same pace. One key debate was around like-for-like (LFL) performance and whether a March spike in demand was temporary.

Brokerages split on DMart: Sell, Hold and Buy

Post-results commentary showed a wide range of views on DMart’s near-term risk-reward. Emkay Global Financial Services reiterated a Sell stance, citing pressure from QC, a slower total addressable market (TAM) expansion, and weakening returns. ICICI Securities stayed cautious with a Hold view, focusing on balance sheet and return ratio risks as growth investments rise. Motilal Oswal Financial Services, in contrast, stayed positive on store expansion momentum and raised its target price.

These views also reflect how analysts are weighing two competing signals. One is the company’s steady execution in adding stores and growing revenue. The other is whether higher costs, debt, and competitive intensity can dilute profitability and returns.

Emkay keeps Sell, points to valuation and QC threat

Emkay Global Financial Services maintained a Sell rating with a target price of ₹3,700. The brokerage cited slow TAM expansion, a fading value and assortment edge versus quick commerce, deteriorating return on invested capital (ROIC), and an expensive valuation. Emkay also flagged the stock trading at about 80x one-year forward price-to-earnings (P/E), based on its framework.

On the quarter, Emkay said Q4 was healthy but in-line, with 23-25% EBITDA and profit before tax (PBT) growth, helped by LFL improvement. However, it noted management attributed the LFL uplift to a spike in consumer buying in March 2026 amid geopolitical tensions, which normalised toward the end of Q4. The brokerage also pointed to a 5% increase in average basket value (ABV), linking it to that period.

Emkay expects topline growth to inch up to 19% in FY27E with accelerated store openings, but higher allied costs could restrict profit after tax (PAT) growth to 16%.

Motilal Oswal stays Buy, raises target to ₹5,200

Motilal Oswal Financial Services retained a Buy rating and raised its target price to ₹5,200 from ₹5,000. The brokerage highlighted that DMart’s store additions ramped up to 85 in FY26. It said sustained acceleration in store additions remains the key growth trigger.

Motilal also outlined its longer-range expectations, building in a consolidated CAGR of 19% in revenue, 20% in EBITDA, and 19% in PAT over FY26-28E. The brokerage attributed this to a 16% CAGR in area additions alongside high-single-digit LFL growth.

ICICI Securities: Hold, sees risk-reward shifting

ICICI Securities maintained a Hold rating and increased its target price to ₹4,350 from ₹4,250. It said Avenue Supermarts delivered strong revenue growth in Q4FY26 and highlighted execution on capex, noting that the company crossed the 500-store milestone in FY26.

At the same time, ICICI said risk-reward dynamics are shifting as the company absorbs higher debt and heavier inventory to sustain growth, which can compress return ratios. The brokerage added that until it sees a definitive structural shift in margin mix, including a recovery in GM&A, and stabilisation in store-level throughput, current valuations appear to price in the long-term execution narrative. It also remained cautious on the stock’s ability to deliver significant near-term outperformance.

Quick commerce and valuation are central to the debate

The competitive pressure from QC featured prominently in the post-results commentary, especially in Emkay’s thesis. The concern is that fast delivery models can weaken the perceived edge of large-format value retail, particularly in categories where consumers may prioritise convenience.

Valuation remains another recurring issue in analyst notes. Separate commentary in the provided material described Avenue Supermarts trading at around 88.6x P/E, versus an industry average of about 43.5x. The same section suggested that elevated valuations can lead investors to reassess near-term upside, adding to selling pressure.

Store expansion, delivery presence, and operating choices

Store rollout continues to be a key part of DMart’s strategy. The material also states that as of 31 March 2026, total stores stood at 500, including one store at Sanpada, Navi Mumbai that is closed to customers due to reconstruction. Another data point in the text notes that home delivery service DMart Ready is operating in 18 major cities in India.

Expansion, however, can raise costs and capital needs. One section of the material described store-led growth as requiring significant upfront investments in land, buildings, warehouses, and backend infrastructure, which can lift capital expenditure during periods of faster store additions.

Key numbers at a glance

Brokerage calls and targets

What investors may track next

Investors are likely to watch how DMart balances store expansion with return ratios as debt and inventory rise. The durability of like-for-like growth after the March 2026 spike, which management linked to heightened buying amid geopolitical tensions, will also be a key monitorable. Competitive intensity from quick commerce is another variable that analysts are incorporating more explicitly.

For the stock, near-term moves may continue to be shaped by how the market prices growth versus valuation. Brokerages have already laid out a wide spread in targets, reflecting different assumptions on margins, throughput, and the long-term impact of fast delivery models.