QSR stocks fall as supply issues raise risk of earnings downgrades

LPG supply disruptions and weak demand trends weigh on QSR stocks, raising concerns over earnings outlook and potential downgrades

Shares of quick-service restaurant (QSR) companies fell up to 10 per cent on the BSE during Tuesday’s intraday trade amid growth concerns. Jubilant FoodWorks closed down 10.5 per cent, while Westlife FoodWorld slipped over 2 per cent. Other listed players — Devyani International, Sapphire Foods India, and Restaurant Brands Asia — ended flat. In comparison, the Sensex rose 0.7 per cent to 74,616 at close.

 

Over the past month, these stocks have underperformed the market, falling as much as 13 per cent, against a 4 per cent decline in the benchmark index.

 

Jubilant’s share price hit a 52-week low of ₹409.85, declining over 10 per cent intraday, following a surge in trading volumes after the company released its pre-quarter update for the fourth quarter (January–March/Q4) of 2025-26 (FY26).

 

Its India business reported 6.2 per cent year-on-year (Y-o-Y) revenue growth to ₹1,686 crore. Revenue growth has moderated, declining from high teens in the first quarter (April–June/Q1) of FY26 to mid-single digits in Q4FY26. Consolidated revenue rose 19.1 per cent Y-o-Y to ₹2,505.8 crore for the quarter.

 

The improvement in consolidated performance was largely driven by the international business. Domestic like-for-like (LFL) growth for the quarter remained flat at 0.2 per cent, reflecting a high base.

 

Elara Securities said the weakness appears largely attributable to ongoing commercial liquefied petroleum gas (LPG) supply constraints. This is likely the primary driver of the miss, rather than any structural demand weakness, especially as competitive intensity in the pizza segment continues to ease.

 

The ongoing US-Iran conflict is creating operational challenges, primarily through disruptions in LPG availability and logistics. A large proportion of stores remain dependent on commercial LPG cylinders (over 70 per cent for Domino’s and over 60 per cent for KFC and Pizza Hut), making them vulnerable to supply-side constraints. Some players, such as McDonald’s, have lower dependence (20–25 per cent of stores). However, companies have largely managed to navigate the situation, and most stores across brands remained operational during March, according to Motilal Oswal Financial Services (MOFSL).

 

Commenting on Jubilant’s Q4FY26 update, Elara Securities said it will closely track LFL trends to assess whether the weakness is transient or indicative of sustained pressure, which could trigger downgrades to estimates and valuation multiples.

 

Companies have taken multiple measures — electric ovens, induction cooking, and menu changes — but any supply disruption could still affect operations. Gross margins are expected to remain healthy, although value offerings and discounting by some companies, such as McDonald’s and KFC, over the past six months may weigh on margins, MOFSL said in its Q4FY26 preview for the consumer sector.

 

According to MOFSL, QSR companies showed early signs of sequential improvement in Q4FY26, with January seeing relatively better traction. Early Navratri (last year in April) and Ramadan had a partial impact on demand. Still, most companies reported better same-store sales growth trends than in the third quarter (October–December/Q3).

 

Meanwhile, India’s food services sector remains highly dependent on LPG, with nearly 90 per cent of the roughly 500,000 organised restaurants relying on commercial cylinders, as piped natural gas access is limited to select metros. Most outlets maintain limited inventory buffers; a prolonged supply disruption could quickly translate into operational stress for 25–30 per cent of restaurants, analysts at JM Financial Institutional Securities said.

 

Anurag Katriar, former president of the National Restaurant Association of India, said burger and pizza QSR chains appear relatively insulated due to greater use of electric equipment. In contrast, Indian, Chinese, catering, and smaller independent outlets remain more vulnerable due to their reliance on flame-based cooking. If the LPG shortage persists, the sector could face meaningful operational disruptions and margin pressure, particularly given its high fixed-cost structure.