PVR, Jubilant FoodWorks: Consumer-centric stocks to feel COVID-19 heat

The spread of Coronavirus (Covid-19) in India is likely to impact businesses of consumer-centric companies such as multiplex, entertainment, and restaurant chains in the near-term as people refrain from assembling in public places as a precautionary step. Moreover, preventive measures by some state governments may also add to their woes. 

Karnataka government reportedly expressed its inability to host the Indian Premier League (IPL) this year. Kerala, too, has announced closure of movie theatres till March 31. These developments, analysts say, are likely to impact stocks of multiplex operators such as PVR, Inox Leisure, as well as restaurant chains and theme park counters such as Jubilant Food Works, Westlife Development, and Wonderla Holidays.

In the past one month alone, these stocks have slipped up to 24 per cent. PVR and Inox Leisure top the losers list with a drop of 24 and 23 per cent respectively, ACE Equity data show. In comparison, the Nifty50 index has lost around 14 per cent during this period.

“These stocks are likely to remain under pressure, but a lot will depend on how prolonged the coronavirus scare is in India. While Kerala has banned movie screening for now, other states may follow if the number of cases rise,” said Deepak Jasani, head of retail research at HDFC Securities.

Quick service restaurants (QSRs) such as Jubilant FoodWorks may also see some near-term headwind, say analysts at Dolat Capital. A postponement of IPL, they believe, will hit sales in the first quarter of financial year 2020-21 (FY21).

“If one looks at last few years' data, there is a jump of around 9 per cent in sales on a quarter-on-quarter basis mostly on account of IPL. This delta (of 9 per cent jump in sales and around 10 – 12 per cent at the profit after tax level) will get eroded if the IPL is postponed / cancelled. On an annualised basis, the impact will be around 2-3 per cent on earnings,” said Sachin Bobade, vice-president for research at Dolat Capital.

Those at Edelweiss Securities, too, expect coronavirus to ‘sting multiplexes’ in the near term (Q4FY20 and Q1FY21) due to waning footfalls. The brokerage envisages 7-8 per cent dip in footfalls at INOX Leisure (INOX) and PVR.

Chickening out

Meanwhile, analysts say chicken sales in India have come down by over 50 per cent while prices have slumped a massive 70 per cent in the last one month amid rumours that chicken consumption causes coronavirus. And the stock of Venky’s India, which has tanked 31 per cent over the past month, proves this point. Other stocks that are likely to see negative impact are theme parks like Wonderla Holidays, as footfalls could reduce significantly.

“Food orders that includes chicken will also reduce thus affecting the delivery business of Westlife Development and Jubilant FoodWorks. Additionally, given the fact that currency also transmits virus, this is expected to prevent people from placing orders for home delivery,” Bobade explained.

Given the developments, analysts suggest investors to wait on the sidelines for now rather than be adventurous and buy the dips as regards these stocks. “Whether you should bottom fish or not, it depends on how prolonged the virus is. While there will be intermittent rallies in these stocks, long-term investors should wait,” suggests Jasani.

Though Amnish Aggarwal, head of research at Prabhudas Lilladher has a 'buy' rating on PVR, Inox Leisure and Jubilant Foodworks from a long-term perspective, he, too, doesn't rule out further correction in the near-term given the developments.