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PL Capital Report
We estimate our coverage universe to report sales, Ebitda and profit after tax growth of 8.9%/6%/4.6% YoY on 58 bps Ebitda margin contraction. Rural grew ahead of urban in staples while discretionary demand remained tepid. QSR (Jubilant FoodWorks, Westlife Foodworld and Burger King) will report decline in profits YoY.
Rural demand is showing signs of improvement while urban demand growth is steady, partly impacted by food inflation and recent floods. Competitive intensity across detergents, hair oil, skin, deo, instant noodles, juices, mass skin care etc. remains intense. Decline in food inflation and impact of normal monsoons is likely to improve demand growth in coming quarters.
Demand across QSR, footwear and apparel continue to remain tepid. QSR same-store sales growth trends should range between -5% to flat. Paints witnessed a weak quarter amid heavy rains across regions although 3Q looks better due to upcoming festival and wedding season.
Jewellery had a decent quarter led by prepone of wedding shopping due to duty cuts; however, gold prices saw a sharp rally, which dampened sept demand.
We believe valuations have no room for negative surprise in majority of cases. Slower than expected demand revival in festival and wedding season is a major risk to estimates and stock prices.
We are cautious post sharp rally led by sectoral churning and hopes on strong H2 demand. We rate Titan Company as preferred pick given hopes of sustained demand in festival and wedding season.
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Also Read: Healthcare Q2 Results Preview - Strong Quarter Aided By U.S. Sales, Higher Margins: PL Capital
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