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We maintain SELL on DMART with unchanged TP of Rs3,700, based on 54x Jun28E EPS, due to slow TAM expansion, fading value/assortment differentiation versus Q-Com, declining ROIC, and expensive valuation at ~65x 1Y fwd PER. We attended DMART’s annual analyst call expecting structural initiatives by the new CEO (Anshul Asawa) for improving SSG, his outlook for the fast-growing Q-Com channel, and cues for faster expansion. Asawa pointed to efforts toward improving the tech stack and building capacity for higher store additions; however, the 15% expansion outlook (vs ~20% in FY26), status quo on nil data collection at stores, preference for slotted deliveries (vs Q-Com), and no major play in the large fresh category did not indicate any material deviation but seemed only an improved execution of the previous strategy. The key positive, though, was its target of ~8% LFL in FY27 (vs 5.5% in 1Q). SSG is primarily being driven by better traction in non-metros, while metro stores are seeing flat SSG due to peak throughputs and higher competition. Gross/PAT margin are expected to remain at 14-15%/~5%, respectively, as focus continues on capturing volume-driven growth. Gross debt is expected to increase to ~Rs20bn (vs ~Rs10bn at FY26-end), highlighting need for external capital for funding growth

Expects SSG to improve in rest of FY27; targets ~15% network expansion

DMART expects SSG to sustain at ~8% (similar to FY26), while continuing its disciplined, cluster-based store expansion strategy. Having entered five new states in FY26, focus will now shift to increasing store density in these new markets. The company continues to target annual expansion of ~15% (implies ~75 stores in FY27), supported by a healthy 2-3-year pipeline, though the actual pace may differ slightly (+/- 2%), depending on regulatory approvals. DMART seemed more open (vs the past) to smaller-format stores and long-term leases, in markets where outright land acquisition is difficult (eg NCR). As of FY26-end, 68 of its 500 stores (ie ~14%) operated on long-term leases, with 15 of the 85 store additions in FY26 being leased. The primary bottleneck remains the timeintensive process of owning and developing stores a structural advantage that the company intends to preserve

Upholding EDLC-EDLP strategy; large TAM to allow growth, despite competition

DMART acknowledged entry of new players in the Q-Com space and where competitive intensity would remain high in the near term. However, management remains confident of DMART’s EDLC-EDLP strategy, highlighting core focus on providing better value to customers at DMART stores. It believes that continued execution of its strategy, coupled with disciplined brick-and-mortar expansion, will enable resilience despite growth of quick commerce. It also noted that organized penetration remains low, providing headroom for multiple formats to coexist. Further, it observed that globally, consumers do not rely on a single retail format and make different shopping trips for different occasions.

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