Jefferies has revised its target price downward for Avenue Supermarts to ₹4,100 from ₹4,225, while maintaining a ‘Hold’ rating, after the company’s Q4FY25 results revealed a sharp decline in operating margins, attributed to intensifying competition in the retail space.
For the March quarter, Avenue Supermarts reported a net profit of ₹551 crore, marking a 2% decline YoY from ₹563 crore in Q4FY24. The company’s revenue grew 17% YoY to ₹14,872 crore, supported by steady store additions and rising footfalls. However, operating leverage was weak, with EBITDA rising only 1.2% YoY to ₹955.3 crore, and margins dropping sharply to 6.4% from 7.4% a year ago.
Jefferies highlighted that the fall in EBITDA margin to 6.8% (as per internal estimates) was a major disappointment, especially considering D-Mart’s strong reputation for efficiency in the value retail segment. Management attributed the margin compression to high competitive intensity, possibly from both traditional retailers and modern retail peers.
The brokerage noted that while Avenue Supermarts continues to execute well on growth and expansion, margin pressures are likely to persist in the near term, particularly as price wars in groceries and daily essentials remain aggressive. This has prompted Jefferies to trim its FY26–27 earnings per share (EPS) estimates by 4–7%, citing a lower-than-expected profitability trajectory.
Despite the volume and revenue growth trends remaining intact, the firm believes that current valuations already capture much of the optimism surrounding Avenue Supermarts’ long-term story. With no near-term catalysts for a re-rating and limited visibility on margin recovery, Jefferies suggests a more balanced stance on the stock.
Disclaimer: The above views are those of the brokerage and not the publication. Investors are advised to consult a certified financial advisor before making any investment decisions.
