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Jefferies cuts DMart target to Rs 4000 from Rs 4500 after Q2 margin miss; Citi trims to Rs 3250
Our read
Avenue Supermarts will more likely than not see estimates trimmed further before margins steady near 7.5% for FY27, with profit growth still trailing revenue.
For operators
Even with strong traffic and like-for-like growth, DMart's Q2 margin miss shows that rivals in value retail have to protect margins as well as volumes, because profit growth has lagged revenue in 11 of 14 quarters.
Watch
Margin above the 7.5% Morgan Stanley models for FY27, at the next results, would mean the Q2 miss was one-off and estimate cuts stop spreading across brokerages.
The report,
Jefferies cut its Avenue Supermarts (DMart) target price to Rs 4000 from Rs 4500 after a Q2 margin miss despite strong traffic and like-for-like growth. Citi cut its target to Rs 3250, and Morgan Stanley sees FY27 margins at 7.5%.
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What we verified
Checked against the other reports of this story.
- Not a single-source story: Business Today reports the same development independently.
The counter-case
The case against this reading — not reported by the source.
The headline reads like a thesis break, but the numbers describe a modest reset. Morgan Stanley cuts FY27-29 EPS by 4% and Jefferies by 2-3%. Jefferies' target falls about 11% (Rs 4500 to Rs 4000), so most of the cut is a lower multiple, not a collapse in earnings. That suggests brokers are repricing a premium stock rather than finding a broken business. The margin miss also arrived alongside strong traffic and like-for-like growth. A plausible reading is that DMart is deliberately trading margin for volume and market share, as it has done before. The 'profit growth lagged revenue in 11 of 14 quarters' stat cuts both ways. It shows the miss is a known pattern rather than fresh news, so a target cut now may be catching up with something already priced in. Morgan Stanley's forecast of margins rising to 7.6% by FY29 is a recovery path, not a structural decline. Finally, the cuts are bunched around one print. Brokers often move together after a quarter and then drift back if the next quarter is clean.
Why it matters to operators and investors
Brokerages are repricing Avenue Supermarts on weaker margins despite healthy traffic, so any valuation benchmark, partnership or competitive move involving DMart should assume margin recovery to only 7.6% by FY29, not a quick rebound.
What to watch next
- Profit growth versus revenue growth in the next quarter, after lagging in 11 of 14 quarters
- Any brokerage target below Citi's ₹3250 after the Q2 results
- Like-for-like growth and traffic in the next quarter, to see if volume strength holds
- Management commentary on gross margin and pricing investment at the next earnings call
Likely next moves
Our read of what comes next — analysis, not reported by the source.
- Other brokerages are likely to trim FY27-29 estimates toward the 4% EPS cut Morgan Stanley made and the 2-3% Jefferies made.
- Avenue Supermarts management is likely to defend its low-price, volume-first model on the next call rather than promise a quick margin rebound.
- Institutional investors are likely to treat DMart as a valuation-reset story until profit growth stops lagging revenue growth.
- Rivals in grocery and value retail may keep up price competition, since DMart's traffic strength shows where the volume is.
- Analysts are likely to shift debate from store-expansion pace to margin delivery, with Morgan Stanley's 7.6% by FY29 as the reference point.
Updates
Each later report on this story, newest first. Earlier entries are never edited; a correction is a new entry.
DMart Q2 growth quickens to ~18% but margins slip; Motilal Oswal cuts target to Rs 3,925
- Q2 FY27 like-for-like growth: 9.5%
- Q2 FY27 store additions: 15
- Total DMart stores: 518
- Q2 Ebitda margin change YoY: ~30bp contraction
- H1 FY27 Ebitda margin: 7.8%
On the record
Earlier DMart reports on RetailIntel, newest first.
- : DMart parent Avenue Supermarts Q2 net profit rises 8.5% to ₹742.98 crore as total income grows nearly 18%
- : DMart grows revenue 18.4% but value retail stocks slide as V2 Retail cuts same-store sales guidance
- : Elara expects DMart and Trent sales up ~18% in Q2FY27, Nykaa revenue up 26.7%, as cost inflation threatens margins
- : Avenue Supermarts falls as much as 6% as Citi keeps 'sell' despite 18.4% Q2 revenue growth
Reported figures
From the report. Source details below
| Morgan Stanley expected margin by FY29: | 7.6% |
|---|---|
| Morgan Stanley FY27-29 EPS estimate cut: | 4% |
| Jefferies EPS cut: | 2-3% |
| Quarters profit growth lagged revenue: | 11 out of 14 |