Consumer Discretionary : Selective growth amid uneven demand by Elara Capital
Selective growth amid uneven demand
In the Spirts segment, we expect Radio Khaitan (RDCK IN) to post robust IMFL volume growth in Q3FY26, with sustained traction in P&A, partly led by new launches. However, strained growth in Maharashtra may weigh down United Spirits (UNITDSPR). Tailwinds – lower material cost – may prop margin expansion for RDCK, while operating deleverage may hit UNITDSPR. The beer category is under pressure due to regional and weather-related issues, though relief in input cost may offer some margin support. In the quick service restaurant space, overall same store sale recovery is below expectations, with Jubilant FoodWorks (JUBI IN) outperforming peers. Growth was capped by early arrival of festival season. With soft SSSG, operating deleverage may erode YoY margin. Expect TRENT’s fashion network to grow 29.2% YoY Standalone sales may grow c.20% YoY. NYKAA may sustain Q2 momentum into Q3 (BPC/Fashion GMV likely up 29.0/30.0% YoY).
Alcobev – Volume-led growth, margin divergent: We expect diverging trends in the P&A space – RDCK may post IMFL volume growth of ~16% YoY. P&A volumes may grow 17.5% YoY, led by traction in new launches. Growth in blended realization may be modest at ~2% YoY. The Regular segment may post robust ~35% YoY volume growth despite a high base in Andhra Pradesh. Profitability margin may accelerate, with easing grain prices driving EBITDA margin improvement to ~15%. In contrast, UNITDSPR may see muted volume (-0.5% YoY) due to pressure in Maharashtra but partly offset by ~6% YoY growth in realization, resulting in ~6% YoY revenue growth. Higher A&P and staff costs may compress EBITDA margin by ~103bps YoY to ~16.1%.
Beer category to be soft: United Breweries (UBBL IN) may report a soft Q3E, with volume down ~2.5% YoY due to drop in corporation markets (to mid-teen) and weakness in Telangana, Rajasthan, and Karnataka from adverse weather, price revisions, and license delays. Strong growth in Maharashtra (high-teens) may partly offset the drop. Realization may rise ~2.5% YoY, keeping revenues broadly flat. Lower grain and bottle costs may lift gross margin to ~43.5% (+40bps YoY) and EBITDA margin to ~7.7% (+64bps YoY).
TRENT standalone – Revenue may grow c.20% YoY: In Q3E, TRENT’s fashion network may grow 29.2% YoY – 850 stores of Zudio (+44 in Q3E); 278 for Westside (+14) – with growth of 33.9% YoY and 16.8% YoY, respectively. Standalone revenue may grow c.20% YoY led by mid-single digit LFL in Q3E. Gross margin may touch 43.8% QoQ (flat) and EBITDA margin 18.5% (flat).
NYKAA – Growth momentum sustained: In Q3E, sales may grow 26.5% YoY, led by BPC GMV likely growing 29.0% YoY and Fashion GMV 30.0% YoY. BPC take rate may dip 44bps QoQ to 59.6% on seasonality (stable for fashion at 17.0%). Expect NYKAA to continue with A&P spend amid festivals, keeping BPC margin broadly stable at 8.4% despite scale. Fashion profitability may improve with losses down 6%QoQ, likely resulting in 20bps gain in consolidated EBITDA margin at 7.0%.
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