Retail Update : Weakness persists; prefer JUBI, VBL, METROBR, SENCO By Emkay Global Financial Services Ltd

Consumption trends remain muted in Q1FY26, with incremental growth moderation for jewelry retailers and summer-focused categories (Soft Drinks/Durables) that were hitherto reporting growth outperformance. Q1FY26 witnessed tailwinds from excessive heatwaves and election-related disruptions in the base quarter, albeit likely offset by the early onset of rains, significant increase in gold price, and geo-political challenges in the interim. Select pockets (like JUBI) are performing relatively better, with a few players (like VBL/AVL/Senco) looking attractive from the valuation perspective. Given unseasonal rains, we foresee significant growth moderation for summerfocused categories like Beverages and Durables. Among notable earnings/TP changes, we cut our earnings estimate for AVL/VBL by ~6%/10%, factoring in the washout of a seasonally strong quarter; however, the ~30% correction in CY25TD is unwarranted and offers an attractive entry opportunity. Despite the subdued trends, we stay constructive on the overall consumer discretionary space, as long-term growth levers remain intact and tax/interest cut/strong monsoons should enable growth pick-up in H2FY26. We prefer outperforming companies like JUBI, along with players like VBL, AVL, and Senco that have seen significant de-rating.
TTAN (REDUCE): Growth to moderate despite pick-up in Gold price
Gold prices are up ~35% in Q1TD, with a ~15% spike in Q1 itself. Despite a low base (heatwaves/election) and significant gold price inflation, our checks suggest that the growth trends in Q1 will see a moderation vs prevailing trends of 15-20% SSG across listed players. Our checks suggest a dip in customer growth/grammage per bill, led by significant gold price inflation and entry of new players (Indriya) in select pockets. With low footfalls at stores, the high-margin studded sales are also under pressure which otherwise see better traction in periods of rise in gold price. While there have been periods of strong rebound in the past, expectations of a recovery now need to be weighed against a strong base, which had big customs duty-cut related pick-up in Q2/Q3FY25. Companies are taking specific actions in terms of reducing the variance in gold price/making charge vs competition, and focusing on gold exchange/monthly instalments to safeguard business. Notably, reported primary growth may differ among players and is contingent on the extent of stocking or de-stocking at franchisee partners.
JUBI (ADD): To outshine peers with 16% India growth vs 7-9% for peers
The overall QSR space should see marginal growth slowdown in Q1, due to unseasonal rains/geo-political events. Despite a prolonged slowdown, we remain constructive on Indian QSRs, as we expect the cut in tax/interest rate and the healthy monsoons to boost discretionary consumption in H2. Against a weak demand backdrop, we expect JUBI’s outperformance to continue in Q1, as we expect it to deliver ~16% India growth vs 7- 9% for other QSRs, aided by ~10% LFL for JUBI vs low-single-digit SSG/SSG decline for others. Barring our expectation of a flat EBITDA margin for JUBI (pre-IndAS), we expect margin to decline by 100-200bps for other QSRs in Q1, impacted by value launches and negative leverage. We remain in favor of JUBI and Sapphire, led by relatively better operating performance. Despite under-performance, we maintain ADD on Westlife and BUY on Devyani, due to price correction and potential SSG revival in H2, respectively.
Apparel/PAG (REDUCE): Muted trends aplenty
With muted demand, we expect the single-digit growth to continue for ABFRL and ABLBL in Q1, whereas we expect PAG/GOCOLORS to see some growth moderation. While modern trade channels are seeing relatively better trends, weakness in the GT channel persists for PAG, whereas GOCOLORS is seeing muted volume growth and weak traction with a large LFS partner.
VBL (BUY): Valuations more than factor-in a weak Quarter
Summer-focused categories (Durables/Beverages) are likely to see significant growth moderation due to unseasonal rains. Against this weak backdrop, we cut our earnings estimate for AVL/VBL by ~6%/10%, factoring in the washout of a seasonally strong quarter; however, the ~30% correction in CY25TD is unwarranted and provides an attractive entry opportunity. However, we remain confident of growth revival, on the back of strong execution and capacity/distribution expansion. We maintain BUY on VBL, while trimming our TP by ~8% to Rs575 (vs Rs625 earlier). AVL’s TP remains unchanged at Rs450, helped by rollover to Jun-27E earnings. Correction: (Figures in Exhibit-1 on Page-2, which has now been corrected) Devanshu Bansal devanshu.bansal@emkayglobal.com +91-22-66121385 Mohit Dodeja mohit.dodeja@emkayglobal.com +91-22-66242481 This report is intended for Team White Marque Solutions (team.emkay@whitemarquesolutions.com) use and downloaded at 07/02/2025 12:4This report is intende
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