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HDFC Securities Institutional Equities
Our discretionary universe is expected to nearly double sales YoY in Q1 FY23 as the companies get their first pandemic-free quarter (three-year revenue/Ebitda compound annual growth rates of 16/11% respectively). food and grocery, jewellery, paints, apparel, and footwear are expected to clock 19%, 25%, 15%, 8%, and 2% (three-year CAGRs). Ticket sizes in retail, though normalising, remain elevated vs. pre-Covid levels.
While profitability is recovering across categories, high commodity prices, restoration of rent/other selling, general and administrative overheads, and strong expansion-led expenses are likely to keep margins (excluding jewelry) below pre-pandemic levels.
We bake in a 330 basis points lower Ebitdam in Q1 FY23 (versus Q1 FY20). Store additions remain strong across retail categories. We build in 11% Ebitda CAGR for the universe.
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