’ muted revenue growth in the June quarter has prompted a cautious response from leading global brokerages, with
Goldman Sachs reiterating a ‘sell’ call and both JP Morgan and Morgan Stanley highlighting pressure on same-store sales and margins. The operator of D-Mart reported standalone revenue growth of 16.2% year-on-year in Q1 FY26, below most estimates, despite continued store expansion.
JP Morgan described the performance as “a tad underwhelming,” noting the reported growth fell short of its expectation of around 17%. While DMart added nine stores during the quarter, compared to six in the same period last year, only two were in metro locations, reinforcing the company’s pivot towards non-urban markets. “Revenue per store rose 2% y/y,” JP Morgan said, adding that the company has maintained competitive pricing versus online grocers.
Citing concerns around the impact of quick commerce players on high-turnover urban stores, JP Morgan maintained a 'neutral' rating and set a price target of Rs 4,150, implying a 5.5% downside from the stock's current levels. “Some of the recent outperformance could reverse,” the brokerage cautioned, pointing to the stock’s 9% gain over the past month.
Goldman Sachs maintained a bearish stance, noting that the Q1 sales growth, though steady, was weaker than anticipated even on a sequential basis. “Standalone sales growth in 1QFY26 moderated slightly to 16.2% YoY despite 4QFY25 being adversely impacted by one less day,” the brokerage said, adding that quarter-on-quarter growth of 10.2% was also softer than the prior-year period.
Goldman expects consolidated EBITDA margins to decline year-on-year, citing “a mix shift towards low-margin food products and cost increases from the faster pace of new store additions.” The brokerage flagged heightened competitive pressure in urban markets, particularly from quick commerce operators and a likely pick-up in Reliance Retail’s expansion activity. Goldman retained its 'sell' rating and a target price of Rs 3,400, implying a 22.6% downside.
Morgan Stanley termed the quarter a “miss,” estimating same-store sales growth at around 3-4%. It expects Q1 EBITDA margins to compress to 7.8%, down from 8.7% in the year-ago quarter. While store additions — nine in the quarter — were in line with expectations, the brokerage flagged continued pressure on like-for-like growth and profitability amid intensifying online competition.The brokerage maintained its cautious outlook, applying a residual income model that assigns a higher probability to its bear-case scenario due to the risks posed by e-commerce and quick commerce platforms.
Despite a strong start to 2025 with gains of 23%, Avenue Supermarts shares remain down 8% over the past 12 months. The stock fell as much as 3.9% intraday on Thursday to Rs 4,220 on the BSE, as investors reacted to the cautious brokerage commentary.
Consensus among analysts remains tepid. Data from Trendlyne shows the average target price from 30 analysts at Rs 4,033, implying a potential downside of roughly 8%. The stock carries a consensus ‘hold’ rating.
From a technical perspective, DMart shares continue to trade above seven of their eight key simple moving averages (SMAs), including the 10-day, 20-day, 30-day, 50-day, 100-day, 150-day and 200-day levels, but have slipped below the 5-day SMA, suggesting a potential pause in momentum.
Also read | Avenue Supermarts shares in focus after Q1 FY26 revenue rises 16% YoY; store count hits 424
Momentum indicators are still in bullish territory. The Relative Strength Index (RSI) stands at 63.2, comfortably below the overbought threshold of 70. Meanwhile, the Moving Average Convergence Divergence (MACD) remains positive at 76.3, above both its signal and center lines, reinforcing the prevailing upward trend.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
