Should you buy or sell DMart shares after Q3 update?

Avenue Supermarts Ltd, which owns and operates retail chain DMart, has reported 17.5 per cent increase in standalone revenue from operations at Rs 15,565.23 crore for the third quarter ended December 31, 2024. In the same period last year, the company reported a revenue of Rs 13,247.33 crore. The total number of stores as of December 2024 stood at 387.

Revenue for the quarter is subject to limited review by the statutory auditors of the company, it said.

So, should you buy, hold or sell DMart shares after its Q3 business update?

Morgan Stanley on the counter has continued with its earlier 'underweight' call with a target of Rs 3,702, implying potential gains of just over 2 per cent from the previous close of Rs 3,615 per share. Maintaining the rating, brokerage said weak growth trends at the retail company continue. Standalone 3Q revenue of Rs 15,570 crore  was up 17.5 per cent YoY, nearly 1 per cent above expectations. Furtner it added that the top-line growth was led by an average 12 per cent increase in store count.

Same-store sales growth (implied) at the retailer during the period came in around 5.5 per cent as against estimate of just over 4 per cent. Growth trend remains well below the historical 20 per cent top-line growth algorithm for the business, added the brokerage.

Similarly, Citi has also continued with its 'sell' rating on the diversified retail major with the target pegged at Rs 3,500, implying potential downside of over 3 per cent.

Macquarie, meanwhile has continued with its earlier 'underperform' rating and has suggested a target of Rs 3,700 - meaning potential upside of over 2 per cent. The brokerage noted that the general merchandise/apparel sales recovery aided the 3Q sales print. Additionally, it pointed out that the competitive headwinds from quick commerce (QC) is weighing on the company's growth trajectory.

Sales growth during the period under review has recovered closer to 1QFY25 levels. 10-store additions are in-line with our estimate, it added.

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The brokerage added that DMart guided for 3Q standalone sales of Rs 15570 crore, with a total store count of 387. Typically, 3Q sees a sequential pickup in gross margin given the better product mix, it said.