DMart Q3 Results: EBITDA Soars 20%, CLSA Raises Target

Introduction

Avenue Supermarts, the operator of the D-Mart retail chain, delivered a significant earnings surprise in the third quarter of fiscal year 2026, driven by robust margin expansion. The company's EBITDA grew by over 20%, substantially outpacing analyst expectations of 8-10%. This strong performance has led to divergent views among brokerage firms, with CLSA turning more bullish while others like Citi remain cautious about the sustainability of this growth amid a competitive retail landscape.

Q3 Financial Performance Breakdown

For the quarter ending December 2025, Avenue Supermarts reported a consolidated revenue of ₹18,100.88 crore, a 13.3% increase from ₹15,972.55 crore in the same period last year. Management noted that this revenue growth was partially tempered by deflation in the staples category. The standout figure was the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA), which surged 20.2% year-on-year to ₹1,463.37 crore. This outperformance was primarily fueled by an improvement in margins. Consolidated EBITDA margin expanded to 8.1% from 7.6% a year ago, while gross margin improved to 15.3% from 14.7%. Consequently, profit after tax (PAT) grew by 18.3% to ₹855.78 crore from ₹723.54 crore in Q3FY25.

Key Financial Highlights for Q3FY26

Operational Metrics and Store Expansion

Despite the strong profitability, some operational metrics showed signs of moderation. Sales per square foot remained largely flat at ₹9,290 compared to ₹9,317 in the corresponding quarter of the previous year. The company's like-for-like (LFL) growth, which measures sales growth in stores open for at least a year, was recorded at 5.6%. Avenue Supermarts continued its network expansion, adding 10 new stores during the third quarter. This brought the total number of stores to 442 by the end of December. For the first nine months of the financial year, the company has added a total of 27 stores, reinforcing its strategy of steadily increasing its physical footprint.

CLSA's Bullish Stance

Following the strong results, CLSA reiterated its 'High Conviction Outperform' rating on Avenue Supermarts. The brokerage raised its price target for the stock to ₹6,185 per share, signaling strong confidence in the company's growth trajectory. CLSA increased its consolidated earnings estimates for FY26-28 by 1% to 7%, factoring in the better-than-expected profit growth. The firm's positive outlook is based on the belief that DMart's business model is deeply moated and that India's long-term consumption story remains intact.

Citi's Cautious Outlook

In contrast, Citi maintained its 'Sell' rating on the stock with a price target of ₹3,150. The brokerage expressed skepticism about the sustainability of the recent margin expansion. Citi analysts suggested that the improvement in gross margins might be attributable to one-off factors, such as additional discounts from FMCG companies looking to liquidate inventory around GST rate changes. Furthermore, Citi highlighted the increasing competition from quick commerce players and a slowdown in same-store growth as significant risks. The brokerage pointed out that DMart's profit growth has lagged its revenue growth in 10 of the last 12 quarters, a trend it attributes to competitive pressures and cost inflation.

Other Analyst Perspectives

Nuvama Institutional Equities took a more neutral stance, maintaining a 'Hold' rating with a price target of ₹4,351. Nuvama attributed the sharp profit growth to higher gross margins, likely resulting from reduced discounting after GST rate adjustments. The brokerage also noted a sequential revival in the growth of DMart Ready, the company's e-commerce arm. However, considering the slower overall growth and a sharper focus on margins, Nuvama has adjusted its future revenue and profit estimates. The broader analyst community remains divided. Of the 29 analysts covering the stock, nine have a 'Buy' rating, twelve recommend 'Hold', and eight have a 'Sell' rating.

Conclusion

Avenue Supermarts' third-quarter results showcased its ability to drive profitability through margin management, even as revenue growth faced headwinds from deflation. The 20% EBITDA growth was a clear positive surprise. However, the divergence in analyst ratings from 'High Conviction Outperform' to 'Sell' underscores the key debate surrounding the company: whether this margin-led performance is sustainable in the face of slowing same-store growth and intensifying competition from both online and offline retailers. Investors will be closely watching if the company can maintain its margin trajectory while accelerating its store expansion and navigating the evolving retail environment.