Moneycontrol Pro Cricindex: An 11-stock squad for you to surf the World Cup theme

Fans will travel more (notwithstanding soaring airfares) to watch matches, stay in hotels (albeit at high rates), order more food and eat out and celebrate during this mega sporting event.

Cricket fever has gripped the nation with the start of the ICC Men’s Cricket World Cup, 2023. While fans will understandably be excited, the stock market, too, is angling for its share of the euphoria. The World Cup’s timing coincides with India’s peak festival season and is bound to give a fillip to consumption.

Fans will travel more (notwithstanding soaring airfares) to watch matches, stay in hotels (albeit at high rates), order more food and eat out and celebrate during this mega sporting event. To capture the rub-off effect on consumption, we have created a one-of-its-kind Moneycontrol Pro Cricindex, which will track 11 stocks that could see higher investor interest thanks to higher consumption demand during matches.

While there will be far more companies benefiting directly or indirectly from this event, the Tracker has restricted itself to fundamentally stronger businesses with earnings visibility and reasonable valuation. That’s why, apart from mentioning why they could benefit from the World Cup, we have written about their fundamental outlook as well.

Eleven stocks have been selected for the tracker with equal weights. The start date of the tracker is October 1. As of October 6, the tracker has risen by 3 percent against a largely flat Nifty.

Hotels and Aviation

The sporting event, in addition to attracting huge viewership, would add to air travel demand as people fly to other cities to watch matches live. There are 10 venues across the country for 48 matches. One of the obvious beneficiaries would be Interglobe Aviation (Indigo). While soaring fuel prices are a concern, the airline has recently introduced fuel charges. And given the reduced competitive intensity due to the halt in GoFirst’s operations, Indigo and other leading airlines have gained reasonable pricing power to offset the fuel cost headwind.

Hotels, which have already picked up pace thanks to the tailwind of a surge in travel, will get an additional boost from the sporting event, with teams as well as spectators staying in leading properties across the host cities. Some of the companies worth looking at are:

SAMHI Hotels: India’s third largest hotel owner (by the number of keys), the chain operates hotels in the mid and the premium segment. Strengthening of its balance sheet via substantial debt reduction using the funds raised in its recent IPO should enable SAMHI to tap the industry upcycle and narrow the huge valuation discount with its listed peers.

Royal Orchid Hotels (ROHL): Royal Orchid is a leading hotel player with a presence mainly in the mid-market segment. Strong industry demand, aggressive expansion plans pan-India, and the induction of professional management to facilitate growth provide strong earnings visibility. With strong earnings growth and ROHL gaining scale, the valuation gap with listed hotel players should narrow.

Food and Beverages 

Another trend that has been observed during sporting events, especially cricket, is the increase in food ordering as well as watching the event in a restaurant. In the previous IPL season, food orders rose 25-30 percent over the non-IPL season. Zomato, the largest food delivery and quick commerce platform, which recently achieved profitability in its operations, is likely to see a bump-up in total orders.

Quick service restaurants (QSRs) will also benefit. Devyani International (DIL) is the largest franchisee of Yum brands (KFC and Pizza Hut) in India. DIL is also the sole franchisee of Costa Coffee in India and operates south Indian food chain ‘Vaango’. With rapid store expansion, menu innovation to boost same-store sales growth and margin improvement owing to operating leverage, we expect DIL to be among the fastest-growing QSR companies over the next few years.

Sapphire Foods India (SFIL) is the second largest franchisee of Yum brands in India (it operates KFC and Pizza Hut). Aggressive store expansion in India and catching up with sister franchisee DIL’s margins have given it long-term earnings growth visibility. We believe SFIL’s valuation discount with sister concern DIL would narrow as it attains scale.

As demand for F&B (food and beverages) is expected to increase, United Spirits, the country’s leading alcohol beverage company and a subsidiary of global leader Diageo, can see volume improvement. United Spirits manufactures, sells, and distributes a wide portfolio of premium brands such as Johnnie Walker, Black Dog, Black & White, VAT 69, Antiquity, Signature, Royal Challenge, McDowell’s No.1, Smirnoff and Captain Morgan. United Breweries, a 61.52% subsidiary of Heineken, has a robust retail footprint, and can benefit from strong demand for its ‘Kingfisher’ brand.  Radico Khaitan, which has a market share of close to 7% in the IMFL (Indian Made Foreign Liquor) segment, benefits from strong brand awareness thanks to a diverse range of products across various price points, in the popular, prestige, premium and luxury segments.

Others

PVR Inox, a multiplex operator having 1,698 screens across 113 Indian Cities, is in talks with the ICC to screen India matches and finals in the theatre. This will not only mean ticket sales but also revenue from Food and Beverage (F&B) sales. While OTT platforms continue to remain a challenge, the previous quarter saw it put up a strong box office performance that will help in margin improvements this fiscal year.

Nazara Technologies is a leading diversified gaming and sports media platform. It has a presence in India as well as emerging and developed global markets such as Africa and North America, with offerings across interactive gaming, eSports and gamified early learning ecosystems. Nazara owns the sports web portal sportskeeda, which should benefit from the cricket world cup.

Disclaimer: The stock list selected for the ICC World Cup Tracker should not be construed as a stock/portfolio recommendation. The stock prices of companies in the list could react positively/negatively in the short-term to a host of factors besides the World Cup. The overall direction of the market might also have a near-term impact on stock prices.