With discretionary spending of consumers showing continued momentum coupled with favourable price effect, private final consumption expenditure (PFCE) picked up by 12.4 per cent in India in the April-June quarter this fiscal, as against 8.1 per cent in Q1 FY24, stated a report by Bank of Baroda. It further added that the private consumption has grown by 7.4 per cent even in real terms, outpacing GDP growth. While the demand for FMCG and durable goods is on a strong footing, per the report, other segments are witnessing mixed or even muted demand environments.
The alcobev industry: Traction in Prestige & Above (P&A) segment
The alcobev industry saw a modest start to volume growth in the Prestige & Above (P&A) vertical this year, which may continue in Q2, stated an analysis report by Elara Securities. It further added that the overall revenue growth in the P&A segment is expected to be 4.5 per cent YoY in Q2E, largely helped by higher realization per case (led by 3.5/8.9 per cent YoY/QoQ growth). Further, the next quarter, that is, Q3FY25 is expected to be the best performing for P&A volumes, backed by the wedding and festival seasons and winters in December. United Spirits is estimated to report muted volume growth of 1.0 per cent YoY in the P&A segment.
Radico Khaitan, meanwhile, may report a revenue growth of 19.0 per cent YoY in Q2E in the P&A segment, led by volume growth of 14.5 per cent YoY. During the quarter, Radico Khaitan launched a new series of Jugalbandi, Sangam Single Malt and Barrel Blush Rampur single malt in P&A with continued traction in existing flagships. However, the report added that volumes from the regular segment could play spoilsport and may decline by 8.5 per cent YoY in Q2E due to absence of price hike in key states.
United Breweries, which has brands like Heineken, Kingfisher and others, is expected to post a volume growth of 6.5 per cent YoY in Q2, outperforming in the premium beer segment. Per Elara Securities, United Breweries’ Q2 performance may be better than Q1, which was hit by elections and saw just 5.0 per cent YoY volume growth. Excluding the hit from elections, volume grew by 8-9 per cent YoY in Q1FY25. With election season over in Telangana, volume growth is back on track. However, with United Breweries likely losing market share in Karnataka QoQ, its margin may get impacted. Further, volume growth is muted in West Bengal due to price hikes, which hit demand. The opening up of Andhra Pradesh may lead to a sharp volume growth in FY26 (UBBL had +70 per cent market share in the state). Price hike in Telangana is a key trigger to achieve strong margin improvement.
Now for United Spirits, which is known for its brands like Johnnie Walker, Black Dog, Signature, McDowell’s No 1, Smirnoff, Captain Morgan and others, profitability-wise, gross margin may be flat YoY, as the positive impact of lower glass prices may be offset by higher ENA price. Elara Securities stated that the company EBITDA margin is expected to be 16.6 per cent (up 20bps YoY), led by volume recovery. For Radico Khaitan, profitability improvement is healthy as EBITDA may marginally rise 40bps QoQ to 13.5 per cent, helped by better gross margin. Positive impact from backward integration may start to kick in from Q3FY25 due to reducing grain price, the report maintained.
Analysing Nykaa: Ad revenue-led margin improvement
Elara Securities said that Nykaa is estimated to post strong double-digit GMV growth of 30.0 per cent YoY in the online BPC segment. Per its assessment, the core beauty and personal care category is estimated to grow 20 per cent YoY, as the demand environment is mixed. Further, ad revenue may grow 25 per cent YoY in Q2E, and support revenue growth in the online BPC segment. The Fashion segment, meanwhile, may see a 22.0 per cent/ 24.1 per cent YoY/QoQ GMV growth, post a low base in Q1FY25. Overall, EBITDA margin may improve 96bps QoQ and this will be supported by: 1) better ad revenue in the BPC segment; and 2) lower losses in the fashion/eB2B segments. Nykaa’s BPC (including eB2B and Nykaa Man) EBITDA margin may grow 50bps YoY to 8.6 per cent.
QSR report: Continued decline in SSSG
In the QSR segment, all chains, except Jubilant Foodworks, are estimated to report same-store sales growth (SSG) decline in 2-7 per cent YoY range, as demand environment is muted with weakness in the dine-in channel, stated Elara Securities. Jubilant Foodworks is expected to report positive SSSG with 1.8 per cent YoY growth, and this will be largely led by strong growth in the delivery channel. “Decline in dine-in revenues and impact of the war in West Asia with muted demand environment are key spoilsports for KFC, McDonalds, Burger King and other global chains (reporting a decline in SSSG),” the report said.
Within the pizza segment, Sapphire Foods is estimated to outperform Devyani International with an SSSG decline of 2 per cent YoY for the former, due to lower store addition. Gross margins for most QSR companies are estimated to remain largely stable due to lack of inflationary pressures. Jubilant Foodworks is expected to witness a dip of 60bps QoQ due to product innovation (cheese volcano pizza, cheesy basmati rice, which is low margin in nature).
According to the report by Elara Securities, EBITDA margin for all QSR chains is estimated to decline sequentially, except for Jubilant Foodworks, which may report flat EBITDA margin QoQ.
From: financialexpress
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