ICICI Securities has maintained its HOLD rating on Avenue Supermarts while revising the target price to ₹4,000 from the earlier target of ₹4,400. The brokerage's latest research report highlights the company's continued focus on operational stability rather than aggressive growth expansion.

Financial Performance Analysis

The company delivered a positive surprise on the margin front during Q3FY26, with EBITDA margin reaching 8.40% despite facing an unfavorable product mix. This margin improvement was attributed to strong execution discipline and effective cost control measures implemented by the management.

Growth Momentum and Operational Challenges

Despite margin improvements, Avenue Supermarts faces several operational headwinds that continue to cap its growth momentum. The like-for-like growth moderated to 5.60% in Q3FY26, showing a declining trend from approximately 8.30% in Q3FY25 and 6.80% in Q2FY26. Store productivity levels remain below pre-Covid benchmarks, indicating ongoing recovery challenges in the retail environment.

The company's staples-led product mix and calibrated expansion of DMart ReADY provide earnings visibility and downside protection. However, these factors also limit ticket size expansion and operating leverage potential amid rising competition and urban market fragmentation.

Revised Financial Projections

ICICI Securities has adjusted its financial estimates for Avenue Supermarts based on current market conditions and company performance:

Investment Outlook

The brokerage emphasizes that a meaningful re-rating of the stock would require sustained recovery in discretionary-led like-for-like growth and improved store-level productivity, rather than relying solely on margin support. The current business model suggests that earnings growth is likely to remain steady rather than experiencing sharp acceleration.

ICICI Securities maintains its HOLD recommendation with a DCF-based revised target price of ₹4,000, reflecting the company's stable but measured growth trajectory in the competitive retail landscape.

Prabhudas Lilladher has maintained its HOLD rating on Avenue Supermarts while raising the target price to ₹3,783 from the earlier target of ₹3,736. The brokerage has revised its earnings estimates upward following the company's better-than-expected Q3FY26 performance.

Earnings Estimates Revision

The research house has raised its EPS estimates across multiple fiscal years based on the strong quarterly results. The revision reflects improved profit expectations driven by better gross margins and effective cost control measures.

Q3FY26 Performance Analysis

D'Mart's Q3FY26 results significantly outperformed analyst expectations, with strong performance across key profitability metrics. The company demonstrated effective cost management despite facing some operational headwinds.

The strong performance was primarily attributed to lower overhead costs and healthy gross margins. However, the company experienced an 11 basis points year-over-year increase in cost of retailing and a 36 basis points quarter-over-quarter decline in GM&A contribution.

Operational Challenges

Despite the financial outperformance, several operational parameters showed weakness, indicating underlying business challenges:

• Sales per store declined by 1.1%
• Sales per square foot decreased by 0.3%
• Bills cuts per store per day fell by 2.1% year-over-year, remaining flat over the last two years
• Average bill value remained flattish year-over-year

Financial Position and Store Expansion

The company's interest burden increased significantly from ₹505.00 million to ₹1,011.00 billion in 9mFY26, aligning with analyst expectations. This development positions D'Mart as an ideal candidate for equity dilution according to the brokerage.

Regarding expansion plans, the company added 10 stores during Q3FY26. Prabhudas Lilladher expects store addition pace to accelerate in Q4, with projected total openings of 57 stores in FY26, 65 stores in FY27, and 70 stores in FY28.

Future Outlook and Concerns

For Q4FY26, the brokerage forecasts GM and EBITDA margins of 14.2% and 7.1% respectively on a low base, which should translate into healthy double-digit PAT growth.

However, several long-term concerns persist:

• Intensifying competition from quick commerce across FMCG and non-FMCG segments
• Deteriorating product mix
• Volatile store economics

These factors raise questions about the long-term sustainability of current margin levels. The brokerage estimates a 12.5% EPS CAGR over FY26-28 and has arrived at a DCF-based target price of ₹3,783.

Investment Recommendation

Despite the positive quarterly results and upward revision in estimates, Prabhudas Lilladher maintains its HOLD rating, citing rich valuations at 65.5x FY28E EPS. The brokerage expects back-ended returns for investors in the stock.