Avenue Supermarts, the operator of the D-Mart retail chain, delivered a strong margin-led performance in Q3FY26, with EBITDA growth significantly outpacing analyst expectations. The company's consolidated EBITDA surged 20.2%, well above the projected 8-10% growth estimates. This robust performance was driven by improved operational efficiency and margin expansion across key metrics.

Financial Performance Highlights

The company's Q3FY26 results demonstrated strong profitability improvements across multiple parameters:

The improvement in consolidated EBITDA margins to 8.1% from 7.6% year-on-year was supported by gross margin expansion, which reached 15.3% compared to 14.7% in the same period last year. Management attributed the revenue growth impact partly to deflation in staples during the quarter.

Operational Metrics and Store Expansion

Avenue Supermarts maintained its expansion trajectory while managing operational efficiency. Sales per square foot stood at ₹9,290 compared to ₹9,317 in the previous year, while like-for-like growth for the quarter registered 5.6%. The company added 10 stores during Q3FY26, bringing the total store count to 442. This expansion represents 27 store additions in the first nine months of the financial year, demonstrating the company's continued focus on network growth.

Brokerage Recommendations and Price Targets

Analyst opinions on Avenue Supermarts remain divided following the quarterly results:

CLSA reiterated its positive stance and raised the price target to ₹6,185 per share, increasing FY26-28 consolidated earnings estimates by 1% to 7% to factor in stronger profit growth. However, Citi maintains a sell rating with a ₹3,150 price target, expressing concerns about the sustainability of recent margin expansion. The brokerage suggests that gross margin improvements may have been driven by one-off factors such as additional discounts from FMCG companies related to GST rate changes.

Nuvama holds a neutral view with a ₹4,351 price target, noting that DMart Ready's implied growth of around 20% year-on-year has revived sequentially. The brokerage highlighted that the sharper profit growth resulted largely from higher gross margins, expected to be driven by reduced discounting following GST rate cuts.

Market Performance and Analyst Coverage

Out of 29 analysts covering Avenue Supermarts, the recommendations are distributed as follows: eight have sell ratings, nine recommend buy, and twelve maintain hold ratings. The stock closed 0.45% higher at ₹3,807 on Friday and has gained 1.2% year-to-date. Citi noted that profit growth has lagged revenue growth in 10 of the last 12 quarters, largely due to competitive pressures and cost inflation, while highlighting potential challenges from rising competition in the quick commerce segment.

Avenue Supermarts, the parent company of retail chain DMart, delivered strong third-quarter financial results, showcasing robust operational performance despite some moderation in growth metrics. The company's financial performance reflects its resilient business model in a competitive retail environment.

Financial Performance Highlights

The company's Q3 results demonstrated solid growth across key financial metrics:

The company's EBITDA growth of 20.2% outpaced revenue growth, indicating improved operational efficiency. Margins expanded to 8.1% from 7.6% in the previous year, reflecting better cost management and operational leverage.

Operational Metrics Show Mixed Trends

While financial metrics remained strong, certain operational indicators showed moderation. Like-for-like sales growth slowed to 5.6% compared to 8.3% in the year-ago period, representing the slowest growth in five quarters. The company also reported the highest total bill cuts in five quarters during this period.

On a positive note, Avenue Supermarts reported sequential improvement in sales per square feet, indicating better space utilization and productivity at store level.

Analyst Outlook and Target Prices

CLSA analyst Aditya Soman maintains confidence in Avenue Supermarts' business model, believing the company's low-cost operator model remains robust. The analyst suggests that concerns about competition from quick commerce platforms may be overdone. CLSA has assigned a 'High-Conviction Outperform' rating to the stock.

The brokerage has revised its 12-month target price to ₹6,105 from ₹6,300, which still implies a substantial 63% upside from the stock's Friday closing price of ₹3,745.10.

Broader Analyst Consensus

Analyst sentiment on Avenue Supermarts remains mixed but generally positive. According to Bloomberg data, out of analysts tracking the company:

• Nine analysts maintain a 'buy' rating
• Twelve recommend a 'hold'
• Eight suggest 'sell'

The average 12-month consensus price target stands at ₹4,144, implying a 9% upside from current levels. This more conservative consensus target reflects varied opinions about the company's growth prospects amid evolving retail dynamics.