While DMart’s profitability was ahead of expectations, analysts believe the current valuations do not allow for any errors amid challenges like slowing like-for-like (LFL) sales growth, rising competition, margin headwinds and losses at DMart Ready.
Elara Capital said that DMart ‘s earnings growth (FY26 -28) is estimated at ~20% by consensus, underpinned by healthy store additions, stable LFL growth (~7–7.5% YoY), and broadly steady margins. At ₹4,586, the stock trades at ~ 64x/ 55x FY27/FY28 consensus earnings, leaving limited room for error, it added.
Significant investments in store expansion, prior to stores becoming operational, are weighing on RoCE, as highlighted by Antique Stock Broking.
“The net block grew at a 22% CAGR during FY22-26, in line with revenue growth of 22% CAGR over the same period. Management has previously noted that real estate inflation has adversely impacted RoCE. Consequently, RoCE contracted by ~117 bps YoY to 15.9% in FY26 from 17.1% in FY25. During FY26, DMart also reported negative free cash flow of INR ~4 bn, driven by capex of INR ~40 bn,” it added.
Going ahead, analysts see an improvement in revenue as an inflationary environment, and FMCG price hikes may support ticket sizes. However, the sustainability of the improving margin trend is uncertain.
Elara Capital said that quick commerce is straining DMart ‘s LFL and margins, particularly given its high FMCG and GMA exposure. “Some margin respite may emerge as players such as Swiggy Instamart pivot toward profitability, while new e-commerce entrants such as Zepto appear less inclined toward heavy discounting.”
In light of accelerated store openings, Antique has increased its FY27-28 estimates by ~2%/8% and maintained a HOLD rating with a revised target price for DMart shares at ₹4,524 from ₹4,185, based on 40x FY28 EV/EBITDA.
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