Dmart's Growth Plans Look Solid — But Margins Tell a Different Story

Avenue Supermarts, the company behind Dmart, recently opened a new store in Agra. This move is part of its broader plan to grow in Uttar Pradesh — a region Dmart sees as a big opportunity. But while the company’s expansion plans look promising, its financial health is facing pressure from rising competition and steady margin challenges.

Dmart is Expanding in Key States

Dmart has marked Uttar Pradesh and Orissa as major focus areas for its next phase of growth. The company is planning a steady rollout of new stores in the coming years.

Here’s what the store addition plan looks like:

Dmart’s Growth Story Looks Balanced

Dmart is expecting solid growth over the next few years, with revenue projected to rise at a 19% compound annual growth rate (CAGR) between FY25 and FY28. What’s driving this? A mix of new store openings and stronger performance from existing stores, reflected in a ~8% same store sales growth (SSSG).

Here’s what this means if you’re tracking Dmart as an investor:

• The business is expanding fast — 19% revenue growth suggests strong momentum, largely driven by the company’s ongoing store expansion.

• Existing stores are doing well too — With ~8% growth in same store sales, Dmart isn’t just growing in size, but also making more from its current locations.

• A healthy mix of scale and efficiency — This balance adds confidence to Dmart’s long-term retail strategy, especially as it focuses on markets like Uttar Pradesh and Orissa.

Overall, the numbers point to a well-paced growth story — one that’s not just about adding more stores, but also about getting better returns from each one.

Margins Under Pressure Despite Flat Gross Margins

While the revenue outlook for Dmart looks strong, the picture isn’t as encouraging when it comes to profitability.

To improve margins, the company has been adding private label products across more categories. However, this may only partly offset the pressure coming from quick commerce players, who continue to expand rapidly across cities.

Despite gross margins staying flat, Dmart’s EBITDA margins have declined over FY23 to FY25 — and the margin headwinds are expected to continue.

So, even with steady top-line growth, Dmart margins remain under pressure.

Avenue Supermarts Share Price vs Fair Value

Avenue Supermarts shares are trading at ₹4,336. However, the fair value of the stock is estimated at ₹3,400 based on the sum-of-the-parts (SoTP) method.

This gap suggests that the stock may be overvalued, prompting analysts to maintain a "SELL" rating.

Summary: Expansion is On, But Keep an Eye on Margins

Dmart is clearly focused on growth. Its plan to add new stores in states like Uttar Pradesh and Orissa is on track. The revenue outlook is strong, backed by steady same store performance and a solid expansion pipeline.

However, quick commerce competition and falling EBITDA margins remain concerns. With the current share price trading above the estimated fair value, investors are advised to stay cautious on Avenue Supermarts stock.