Up to 69% upside! 4 stocks to buy from sector hit by LPG shortage fears

In its report on the consumer discretionary sector, covering quick service restaurants (QSRs), alcohol beverages (alcobev) and apparel, Elara Securities said the QSR segment has emerged as the most resilient, aided by benign food baskets, with the LPG shortage issue largely behind us. The brokerage suggested up to 69 per cent upside on Jubilant FoodWorks, Devyani International Ltd, Sapphire Foods, Restaurant Brands Asia and Westlife FoodWorld. Except for Westlife FoodWorld, the brokerage has 'Buy' rating on the rest four QSR players. From the consumer discretionary as a pack, Elara prefers Trent Ltd from apparel segment and United Spirits from alcobev basket and Jubilant FoodWorks from QSR segment. Below are the target prices for the stocks mentioned:-

Data showed stocks such as Jubilant Fodworks and Devayani International are still 5-12 per cent below their Ferbuary 27 levels. The US-Iran war started on February 28.  

Elara said the inflation landscape is uneven, with apparel faces the sharpest headwind, while alcobev is a tale of two categories as ENA deflation shield spirits players such as United Spirits and Radico Khaitan, but beer makre United Breweries remains the most exposed given glass -heavy cost of goods sold (COGS) with no natural hedge. 

Elara  said food costs remain benign so far, while LPG demand–supply dynamics have largely stabilized. Although LPG costs have seen some pressure, their contribution to overall COGS is limited at 1 2.5 per cent. As a result, the impact on QSR margins is expected to be negligible, it said.

"Overall, QSR margins remain resilient, with no material downside risk . On the demand side, sustained recovery in dine -in with SSSG at 4-5 per cent in Q4 for KFC and 4-6 per cent for burger chains, representing a meaningful potential upside risk to our current estimates in QSR," it said.

Jubilant Foodworks, it said, could see positive tailwinds on multiple factors such as LPG impact reversal, low pizza competitive intensity, Dunkin'/Popeyes margin improvement, and dine -in . This collectively better positions Jubilant within QSR . Sustained SSSG momentum in FY27E remains key watch for share price performance, it said.

Elara said spirits players benefit from a natural offset as ENA (the largest input at 50 per cent of COGS) has seen meaningful price deflation of Rs 5-7/liter, broadly cushioning a sharp 15-17 per cent inflation in glass. 

It finds United Spirts and Radico Khaitan as better positioned, with insignificant damage , support from premiumisation and policy trigger in Karnataka. "Beer, by contrast, carries no comparable large weight deflationary offset as glass/ cans alone constitute 50 per cent of beer COGS, and at 15 per cent inflation, the net blended basket impact is 6.1 per cent FY27. Glass price stability is the key re -rating trigger for UBBL," it said.

In the apparel, inflation in fabric and yarn at 10-15 per cent is seen dragging down Ebitda. Domestic prices are rising amid supply tightness and since raw materials constitute 50-55 per cent of COGS.

"That said, Trent appears relatively resilient due to a) GST benefits for the Westside segment, b) continued store expansion in a structurally higher - margin format, c) and improving LFL against a weak base ( we estimate high -single digit LFL drop in past four quarters) , d) Adverse impact of store densification is largely behind," it said.