4 Stocks From Discretionary Consumption Space That Can Jump Upto 31%

Leading stock broking firm Sharekhan has identified stocks of four companies that are part of the discretionary consumption space that can jump by approximately 31%. The companies are Devyani International Ltd, Jubilant Foodworks Ltd, PVR Inox Ltd, and Century Plyboards Ltd.

Each of the companies recently posted their Q4FY2023 numbers. Based on the quarterly performance Sharekhan has recommended investors to "Buy" them. The details are given below.

Devyani International Ltd

Devyani International Ltd posted the second consecutive quarter of weak same-store-sales growth (SSSG) with KFC's and Pizza Hut's SSSG standing at 1.9% and negative 3.2%, respectively. With inflation cooling, SSSG is expected to materially improve by H2FY24, as per the brokerage house.

Sharekhan added, "The medium-term SSSG guidance of 5-6% for KFC & 7-8% for Pizza Hut remains intact. Stock trades at 23.3x/17.5x its FY2024E/FY2025E EV/EBIDTA. In view of its strong business model and long-term growth prospects, we maintain a Buy".

Jubilant Foodworks Ltd

Sharekhan reported that Domino's franchisee player, Jubilant FoodWorks' like-for-like sales stood almost flat at negative 0.6% compared with peers witnessing low single-digit same-store-sales decline in Q4FY2023. Overall revenue growth stood at 8% to Rs 1,252.3 crore.

The stock broking firm suggests, that with the decline in key input prices, it expects softening in cheese prices, EBITDA margin could recover to 23-24% in FY2024. "The stock is down by 26% from its high and is currently trading at 59.0x/41.5x its FY2024E/FY2025E earnings. We maintain our Buy recommendation on the stock."

PVR Inox Ltd

PVR Inox reported a revenue of Rs 1,143 crore, which missed Sharekhan's estimates of Rs 1,171 crore as admissions for February and March 23 were disappointing due to the lackluster performance of other Hindi films, which offset the blockbuster success of Pathan and impressive box office collections of few Hollywood and regional movies.

For FY24, the company expects revenue of Rs 6,000 crores to Rs 7,000 crores, driven by a strong movie lineup and the expansion of cinema screens, the brokerage house mentioned in its research report. Also, the company plans to open 150-175 new screens next year.

"We maintain a Buy on PVR on the back of robust content pipeline, focused expansion of cinema screens, and revenue synergies that are expected flow post the merger. The stock trades at 24.5x/17.7x of FY24E/FY25E EPS." top brokerage house suggested.

Century Plyboards Ltd

For Q4FY2023, Century Plyboards reported strong outperformance led by strong operational performance in Plywood and sequential improvement in MDF OPMs. Sharekhan pointed out that the Plywood segment resurrected due to strong demand which persists going forward.

It further added, that Century Plyboards is expected to benefit from a strong demand environment in Plywood, laminates, and MDF, while particle board is expected to remain flat during FY2024. However, there are headwinds in maintaining MDF prices as newer capacities, including its own, come on stream during FY2024.

On the operational margin front, timber prices are expected to remain high, but there have been tailwinds in softening chemical prices. The stock broking firm believes that the company is relatively well placed due to its diversified product offering in the wood panel industry.

"It is currently trading at a P/E of 30x/25x its FY2024E/FY2025E earnings which provides further room for upside considering the strong demand environment. Hence, we retain a Buy owing to an upward revision in earnings estimates and assigning a higher valuation multiple to factor in its longer-term secular growth potential." Sharekhan stated.

Disclaimer

The stocks have been picked up from the brokerage reports of Sharekhan. Greynium Information Technologies, the author and the brokerage firms are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.