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Below the Quote on Avenue Supermarts (Dmart) Q3FY25 Results by Pankaj Kumar, Kotak Securities

Avenue Supermarts (Dmart) reported decent growth in Q3FY25’s revenue which came in at the cost of margin. 17.7% yoy consolidated revenue growth was driven by 13.5% increase in area and 3.6% increase in revenue throughput. Gross margin in Q3FY25 at 14.7% (-16bps yoy) was 22 bps lower than our estimates impacted by increased price competition in the FMCG category. Quick commerce companies are becoming even more aggressive on product pricing and giving stiff competition to Dmart’s high turnover/sqft stores in Metros. This may drive some spends of value-focused customers away from Dmart. Further, stock valuation at ~58X FY27 P/E does not offer comfort. We retain a cautious stance on the stock in view of the expensive valuations and rising competitive intensity. We maintain Sell on the stock with Sum of the parts (SoTP) based fair value of Rs3450.

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