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Quick commerce to continue dent growth prospects

We raise our FY27/FY28 EPS estimates by 3.3%/0.3%, factoring in the 4QFY26 EBITDA/PAT beat of 3.6%/5.4% driven by lower cost of retail. However, operating metrics in Q4FY26 remain weak, with sales/store up 1.3%, sales/ft up 1.8%, and bill cuts/store/day declining 5.5% YoY (due to increase in store openings). D’Mart highlighted some impact of pantry stocking due to geopolitical uncertainty in March, we believe this could have an impact of ~4% on sales and 40bps on cost of retail, excluding which margins could have been lower as mix deteriorated due to lower GMA sales due to panic buying for essentials.

While D’Mart could gain from benign base in 1H27, repeating performance like 4Q26 looks unlikely as the pantry loading unwinds and overheads related to 58 new stores opened in 4Q26 and entry into 5 new states will curtail margins. We expect higher interest cost as overall debt levels have increased from Rs6.7bn to Rs22.7bn (including financial leases and in line with expectations).

We believe rising competition from quick commerce, are likely to limit growth across Modern trade and D’Mart Ready. We note D’Mart has exited 7 cities in last 1 year and now is confined to 18 cities. Accordingly, we build in EBITDA margins of 7.3%/7.1% for FY27/FY28 versus 7.5% in FY26. We expect the store addition pace to remain elevated with ~75 additions each in FY27/FY28. We estimate an EPS CAGR of 14.1% over FY26– 28 and arrive at a DCF-based TP of Rs4410 (vs Rs4362 earlier). We retain hold with a negative bias given rich valuations of 77.4x FY28E EPS and sharp run up in stock price recently.

Financial Highlights

Consol Revenues grew by 18.9% YoY to Rs176.8bn. Gross margins expanded by 39bps YoY to 14.6% (PLe:14.8%). EBITDA grew by 26.7% YoY to Rs12.1bn (PLe: Rs11.68bn). Margins expanded by 42bps YoY to 6.8%. (PLe 6.6%) mainly as cost of retail contracted by 3bps (50bps est increase) despite opening 58 stores in 4Q26 as pantry loading providing operating leverage. Adj PAT grew by 19.2% YoY to Rs6.6bn (PLe: Rs6.2bn). Bill cuts in Q4 grew by 11% YoY to 101mn, while average bill value came at Rs1751 vs Rs1634 in Q4FY25, but was flattish QoQ.

D’Mart added 85 stores in FY26 (58 in 4Q26) and entered 5 new states. It entered UP, Haryana, Uttarakhand, Goa and Odisha in FY26. The store additions were broad based with states like Punjab, NCR and Karnataka reporting a smart increase. We believe with entry in UP, Haryana and Odisha, expect store addition to gather pace. D’Mart Ready continues to face pressure from quick commerce with Amazon, Flipkart, Big Basket and Jio also becoming aggressive in the segment. D’Mart ready exited 7 cities (1 in 4Q26) and is operating in 18 cities with more focus on home delivery. We believe the business model is in a state of flux and we don’t expect any visibility of any major turnaround in near term

Cost control lifts profitability

Q4 sales were partly impacted by deflation in staples, however, earnings were beat on out estimates led by 50bps lower cost of retail as pantry loading and expected increase in prices of many consumer products provided higher throughput. Sales mix saw significant changes in Q4 with Foods share increasing by 70bps QoQ amidst stocking by consumer while GM&A share decreased by 70bps with Non-food FMCG seeing no change. Debt levels increased to Rs22.7bn (including financial leases). That said, we remain cautious on the medium-term outlook, as intensifying competition from quick commerce in urban markets, along with a narrowing price gap, is likely to structurally cap growth and margins

Adds 58 stores in 4Q, store size declines QoQ

D’Mart added 58 stores in 4QFY26 (vs. 10 stores in 3QFY26), taking the total store count to 500 with retail area expanding to 20.6 mn sq. ft (vs. 18.3 mn sq. ft in 3QFY26). The average area per new store declined to ~39.6k sq. ft in 4QFY26, compared to 40k sq. ft in 3QFY26.

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