Q3FY23 Consumer: QSR – Pizza impacted more by slowdown

17 Feb 2023 , 12:22 PM

In the eleventh edition of IIFL Capital Services “Quirks of the Quarter” series, analysts at IIFL Capital Services explore eleven themes, ranging from sectoral topics such as slowdown in QSR and Apparel categories, divergence between companies (Kansai Nerolac vs Asian Paints, Godrej Consumer vs Jyothy Labs) and the company-specific issues in Varun Beverages, HUL, Dabur, ITC and V-Mart.

1. QSR sector has reported a weak performance in 3Q. However, Pizza players have been impacted more. Analysts at IIFL Capital Services explore the possible reasons for this underperformance.
2. Varun Beverages has delivered a very strong performance in CY22 with the scale-up of its energy drink “Sting” being the primary driver. Analysts at IIFL Capital Services analyse the contribution of “Sting” to VBL’s growth in CY22 and the likely boost it can provide in CY23.
3. While a broad slowdown in Consumer Discretionary categories (QSR, Apparel) have been the theme of Q3, companies such as Westlife, Trent and Titan have bucked the trends. Analysts at IIFL Capital Services analyse the probable reasons and likely sustenance of these in future.
4. While the Home Care segment continues to lead growth for HUL, the gap between growth of Home Care and Personal Care segments has narrowed — both in terms of YoY as well as 3yr Cagr.
5. Dabur reported a 3% sales growth in the domestic business in Q3. Analysts at IIFL Capital Services estimate the impact of each factor on growth and future implications with likely reversal of some of the factors.
6. Cigarette volume growth continues to be robust, with 3yr volume Cagr accelerating from 2% in Q1 to 5% in Q2 and 6% in Q3. Analysts at IIFL Capital Services believe several factors are at play here on ITC are – tax and consequently, pricing stability; share gains from legal as well as illegal and pre-budget stocking up by trade.
7. Asian Paints (APNT) and Kansai Nerolac (KNPL) reported a wide divergence in gross margin performance in Q3. Analysts at IIFL Capital Services estimate that this is largely due to a large salience and limited pricing power in Industrial Paints for KNPL.
8. GCPL has been reporting a better performance vs Jyothy Labs (JYL) in its HI division for the past three quarters (before Q3), even though the performance has been subdued for both. However, in Q3, while JYL has witnessed a 16% decline, GCPL has reported ~7% growth. Analysts at IIFL Capital Services analyse the possible reasons for this divergence.
9. While overall demand for V-Mart (as measured using the sales per sq.ft metric) is yet to recover to pre-Covid levels, Q3 witnessed a deceleration in 3yr Cagr vs Q2. A reduction in ASP and a delayed winter may have been the major reasons for this deceleration.