JPMorgan has downgraded Avenue Supermarts (DMart) to a “Neutral” rating, cutting its target price by approximately 13% from ₹5,400 to ₹4,700. The downgrade comes after the company’s Q2 results fell below expectations, with revenue growth slowing to 14% year-on-year, down from 18% in Q1. The slowdown is attributed to a decline in like-for-like (LFL) growth, which moderated to 5.5% compared to 9.1% in the previous quarter.
JPMorgan highlighted a shift in the company’s narrative. Despite Avenue Supermarts’ management stating two months ago that the impact of Quick Commerce (QC) on growth would be marginal, the latest press release acknowledged the influence of online grocery formats, including DMart Ready, particularly in high-throughput metro stores.
The unexpected moderation in same-store sales growth (SSSG) has prompted JPMorgan to revise its revenue and SSSG forecasts for FY25-26E down by 4-6%. This revision has led to further cuts in margin and earnings estimates, with FY25/26E EBITDA projections reduced by 8% and 10%, respectively
