Avenue Supermarts Limited, which operates the DMart supermarket chain, has reported strong financial results for Q3 FY26, demonstrating robust growth across key performance metrics. The company's consolidated revenue and net profit showed significant year-on-year improvements, while brokerages have presented varied outlooks on the stock's future prospects.

Financial Performance Highlights

The company's Q3 FY26 financial results showcase strong operational performance across multiple parameters:

The company has demonstrated consistent long-term growth with revenue and net profit growing at a compound annual growth rate of 19.00% and 15.78% respectively over the last five years. Avenue Supermarts maintains strong return ratios with ROCE at 18.00% and ROE at 13.40%, while maintaining a conservative debt-to-equity ratio of 0.07x.

Brokerage Recommendations and Target Prices

Analyst opinions on Avenue Supermarts vary significantly, reflecting different perspectives on the company's growth trajectory and valuation:

CLSA has reiterated its "High Conviction Outperform" rating and raised its target price to ₹6,185 per share, citing stronger profit growth and improved earnings visibility. The brokerage increased its FY26-FY28 earnings estimates by 1-7%, supported by operational efficiency, scale benefits, and steady store expansion. Conversely, Goldman Sachs maintains a sell rating with a ₹3,500 target price, flagging slowing like-for-like growth and viewing recent margin expansion as unsustainable.

Store Network and Expansion

As of September 2025, Avenue Supermarts operates 432 DMart stores across 19 cities in India. The company maintains its strongest presence in Maharashtra with 120 outlets, followed by Gujarat with 68 stores, and Telangana with 45 stores. The retail network extends across multiple states including Andhra Pradesh, Karnataka, Tamil Nadu, Madhya Pradesh, Rajasthan, NCR, Punjab, and Chhattisgarh.

Market Performance

Following the Q3 FY26 results announcement, Avenue Supermarts shares jumped 2.97% to reach an intraday high of ₹3,917.95 per equity share from the previous day's close of ₹3,805.10. The stock subsequently retreated and was trading at ₹3,767 per equity share. With a market capitalization of ₹2,45,131.15 crores, the company remains a significant player in India's retail sector, focusing on value retailing through everyday low prices on foods, FMCG products, non-foods, apparel, and general merchandise.

Avenue Supermarts has delivered an impressive profitability performance in Q3FY26, prompting Motilal Oswal to maintain its BUY rating while revising the target price upward to ₹4,600. The retail chain demonstrated strong margin expansion capabilities despite a moderating revenue growth environment.

Strong Margin Performance Drives Profitability Beat

The company's Q3FY26 results showcased significant margin improvements across key metrics. D-Mart achieved substantial profitability gains through strategic margin management and operational efficiency.

The gross margin expansion was primarily attributed to GST reduction benefits leading to lower discounting requirements, combined with a favorable category mix. The retailer benefited from higher contributions from General Merchandise & Apparel (GM&A) and FMCG categories at the expense of the traditionally lower-margin Food category.

Operational Efficiency and Cost Management

After experiencing several quarters of elevated cost of retailing, D-Mart successfully stabilized its cost structure in Q3FY26. The company reported stable cost of retailing per square foot, which directly contributed to the 50 basis points EBITDA margin expansion and drove the 20% year-on-year standalone EBITDA growth.

Revenue Growth and Store Expansion Strategy

While profitability metrics exceeded expectations, revenue growth showed signs of moderation during the quarter.

The revenue growth of approximately 13% year-on-year was largely supported by the 14% store area addition, while like-for-like growth moderated to 5.60% compared to 6.80% in the previous quarter.

Expansion Trajectory and Growth Outlook

D-Mart's expansion strategy remains robust with consistent store additions across quarters. The company added 10 stores in Q3FY26, bringing the total to 27 new stores in 9MFY26 compared to 22 stores added in the same period last year. Motilal Oswal continues to project 60 store additions for the full FY26, indicating confidence in the company's expansion capabilities.

Investment Recommendation and Valuation

Motilal Oswal has assigned a 43x FY28 EV/EBITDA multiple, implying approximately 79x FY28 P/E ratio, to arrive at the revised target price of ₹4,600. The brokerage reiterates its BUY recommendation on Avenue Supermarts, citing the acceleration in store additions as the primary growth driver for the retail chain.