Morgan Stanley upgrades DMart to overweight, says juggernaut is rolling! Here’s why

Wall Street giant Morgan Stanley has upgraded Avenue Supermarts, the operator of DMart, to overweight from equalweight after a strong fourth quarter update, signalling that the ‘juggernaut’ is gathering momentum.

With a target price of Rs 5,188 (previously Rs 4,552), the brokerage implies an upside of 19% from current market levels. Analysts added that DMart is well placed to deliver a better topline and could be a defensive play in the discretionary space.

Here are 3 reasons behind bullish call ahead of Q4 results

1) Topline to accelerate

Morgan Stanley expects DMart’s topline growth to gain momentum, driven by a sharp ramp-up in store expansion. The brokerage estimates around 85 new stores in FY26, compared with 40–50 annual additions over the past four years. This implies nearly 20% growth in the store network versus 13-14% seen in the last three years. These new stores are expected to start contributing to revenue from FY27 onwards.

2) Inflation to aid SSSG

DMart is also likely to benefit from external tailwinds, including a pickup in inflation, which could support same-store sales growth (SSSG) and reinforce its value-focused proposition. Revenue growth is projected to improve to 19–20% in FY27–FY28, compared with around 16% in FY26. The brokerage also noted that DMart could act as a defensive play in the discretionary space.

3) Increasing retail footprint

It observed that the recent growth slowdown at DMart was largely self-inflicted, as store expansion had not kept pace with revenue scale. However, FY26 is expected to see a sharp pickup in expansion, including more stores in existing markets such as NCR and Uttar Pradesh, and entry into new states like Odisha, Goa, and Uttarakhand.

This expansion push aligns with management’s plan to scale the network to 2,200 stores from around 500 currently. The ramp-up is expected to drive faster topline growth and reinforces confidence in management’s revenue guidance of an 18–25% CAGR, well above recent trends. DMart has also strengthened its talent pool, while new CEO Anshul Asawa is seen bringing a fresh perspective to drive the next phase of growth.

The brokerage has revised its FY26 earnings estimates to reflect 9MFY26 performance and the latest Q4 update. FY26–FY28 EPS estimates have been adjusted in the range of –3% to +5%. Morgan Stanley noted that its estimates are 2–8% ahead of Bloomberg consensus and expects consensus revisions upward following strong store additions and the post-quarter update.

In an exchange filing, DMart reported standalone revenue from operations of Rs 17,204.50 crore in Q4 FY26, up nearly 19% YoY from Rs 14,462.39 crore in the same quarter last year. Sequentially, revenue rose around 39% QoQ from Rs 12,393.46 crore in the October–December quarter.

DMart shares were trading nearly 3% higher at Rs 4,485 in the afternoon, up 21% since the beginning of the year.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)