Avenue Supermarts DMart has received a 'Hold' rating from brokerage firm Systematix following its Q3 FY26 performance, which demonstrated better-than-expected margins despite facing some revenue growth challenges during the quarter.

Revenue Performance Across Segments

The retail chain reported mixed revenue performance during Q3 FY26, with growth partially impacted by deflation in staples. Despite this headwind, the company maintained steady growth across its key business segments.

Margin Expansion Through Product Mix

The company's margin performance exceeded expectations during the quarter, with the expansion primarily attributed to an improved product mix. This indicates effective category management and strategic positioning across different product segments, helping offset some of the revenue growth pressures from staples deflation.

Analyst Outlook

Systematix's 'Hold' rating reflects a balanced view of DMart's current performance, acknowledging both the positive margin trends and the revenue growth challenges. The brokerage's assessment takes into account the company's ability to maintain margin expansion despite external market pressures, particularly in the staples category where deflation has impacted overall revenue growth momentum.

Avenue Supermarts (DMart) faces cautious to bearish sentiment from brokerages following its Q3 FY26 results, despite delivering an earnings beat driven by significant margin expansion. The mixed reception highlights concerns over slowing growth momentum even as the retail giant demonstrated improved profitability metrics.

Q3 FY26 Financial Performance

DMart's October-December quarter results showed strong profit growth alongside revenue expansion, though same-store growth remained a key concern for analysts.

The company's EBITDA margins improved to 8.1% from 7.7% in the previous year, contributing to the earnings beat that surprised analysts despite revenue growth coming in below some estimates.

Citi Issues 'Sell' Rating on Growth Concerns

Citi has assigned a 'Sell' rating on DMart with a target price of ₹3,150.00 per share, expressing significant concerns about the company's growth trajectory and margin sustainability. The brokerage highlighted that same-store growth slowed to 5.6%, contributing to the 13% year-on-year revenue growth that fell short of their estimates, with staples deflation partially weighing on revenue performance.

While acknowledging that EBITDA and profit rose 20% and 18% year-on-year respectively, slightly beating estimates, Citi cautioned that margin sustainability remains a significant risk. The brokerage argued that gross margin expansion could be a one-off event, potentially linked to FMCG discounts or reduced discounting following GST changes. Citi also identified a concerning pattern where profit growth lagged revenue growth in 10 of the last 12 quarters, attributing this pressure to quick commerce competition and cost inflation.

Jefferies and Nuvama Maintain 'Hold' Stance

Jefferies maintained a 'Hold' rating with a target price of ₹4,050.00, acknowledging the margin-led earnings surprise while emphasizing concerns about moderating revenue growth and subdued same-store growth trends. The brokerage also pointed to execution risks surrounding store additions and the upcoming CEO transition as additional factors influencing their cautious outlook.

Nuvama retained a 'Hold' rating with a target price of ₹4,351.00, noting that profit growth was largely margin-driven and helped by reduced discounting strategies. While the brokerage flagged a revival in DMart Ready growth as a positive development, it adjusted FY26-27 estimates to reflect slower overall growth expectations and a sharper focus on margin improvement strategies.

Market Performance and Valuation

DMart stock closed at ₹3,807.00, gaining 0.45% ahead of the results announcement, valuing the company at approximately ₹2.48 lakh crore. Over the past year, the shares have delivered gains of around 8.5%, though the cautious brokerage calls suggest limited near-term upside potential despite the recent earnings beat.