Consumer Discretionary : Selective outperformance across the board by Elara Securities India
In Q1FY26, diverging trends may emerge within the Alcobev space – Radico Khaitan (RDCK IN) may continue to outperform, led by innovation and market share gain, while United Spirits (UNITDSPR IN) may grow at a modest pace despite positive impact from opening up of Andhra Pradesh (AP). Regular spirits are buoyant due to AP. Profitability outlook may be mixed – RDCK will gain from premiumization, even as UNITDSPR may scale back upon absorbing upfront A&P spends. Growth for United Breweries (UBBL IN) may be led by election-related base. In QSR, Jubilant FoodWorks (JUBI IN) may maintain LFL, but Pizza Hut may post a drop in SSS led by elevated ADS. SSSG woes for fried chicken continue, albeit low QoQ, while burger chains may maintain positive SSSG. QSR margins may rise sequentially. Trent (TRENT IN) continues to grow with store addition though margins may pare on higher costs. FSN E-Commerce Ventures’ (NYKAA IN) growth may be broad-based, with modest QoQ gain in BPC take rate and lower loss in Fashion.
Spirits – Diverging trends: After a stellar H2FY25, Alcobev in Q1 may see mixed trends. In P&A, RDCK’s volume may grow a strong 17.5% YoY, led by continued market share gain and innovation. UNITDSPR, on a high base (election-led inventory stocking), may grow 6% YoY (3%, excluding AP). The recent policy shift in Maharashtra may show its impact from Q1. Realization per case for RDCK could grow 4.5%YoY (flat 0.5% YoY for UNITDSPR). For RDCK and UNITDSPR, the regular segment may grow 26.0% and 2.0% YoY respectively, as a change in route to market in AP should drive traction. Profitability-wise, QoQ, gross margin may largely be stable (slight gain for RDCK). Expect premiumization-led EBITDA margin gain for RDCK (14.3% in Q1E, up 119bps YoY). Last year’s high base with upfront A&P investment in Q1 may pare UNITDSPR’s EBITDA margin by 300bps YoY to 16.5%.
Beer – Growth on a low base: UBBL may post 7.2% YoY volume growth, on an impacted base by distribution woes in Q1FY25 (due to elections). It would have fared better without early rains. Per checks, premium beer is growing at >20%, with strong traction in King Fisher Ultra Max and Heineken, due to higher absorption of excise hikes versus regular category in key states. Realization per case may be at 3% YoY led by better state mix. Revenue may grow 10.4% YoY in Q1E. UBBL has launched Amstel Grande in Karnataka. Lower gross margin YoY may pare EBITDA margin by 20bps YoY to 11.3%.
TRENT – Stable EBITDA margin with high single digit LFL: In Q1E, TRENT’s store network may reach 790 for Zudio (+25 in Q1E) and 254 for Westside (+6), with 41.3/11.4% YoY growth respectively. Standalone revenue may grow 28.3% YoY, backed by high-single digit LFL. Gross margin may rise by 117bps QoQ to 43.8% post aberration in Q4, but EBITDA margin may remain stable YoY at 15.3% (a drop of 64bps QoQ on seasonally high rental costs).
NYKAA – Broad-based growth: Revenue growth of 25.3% should be led by GMV growth of 28% YoY in BPC, with take rate likely improving 20bps QoQ to 62.2%, led by ad revenue growth and lower discounting. Fashion may accelerate with GMV growth of 27.0% YoY, and a 47bps rise in take rate to 16.0% in Q1E. In BPC, EBITDA margin may be stable QoQ to 8.9%, on sustained A&P spend. QoQ, EBITDA loss in Fashion may be lower by 17%. Consolidated EBITDA margin may expand to 6.8% in Q1E (up 36bps QoQ).
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