International brokerage Bernstein has kicked off its coverage of India's retail and restaurant firms, identifying potential for growth beyond the country's wealthiest top 10% and the largest 40 cities.

According to Bernstein, the spending power of India's middle class isn’t stunted by weak demand but by a lack of affordable and accessible products — a supply-side gap that presents a golden growth opportunity for companies ready to seize it.

Retail Shining: Bernstein has picked DMart and Trent as its top picks in the sector as it expects both to lead in revenue generation and effective inventory management. The brokerage has set target prices at ₹6,300 for DMart, reflecting a 27% upside from current levels, and ₹8,100 for Trent, indicating an 18% upside.

However, not all retail players get a thumbs-up. Bernstein has issued an “underperform” rating for Aditya Birla Fashion and Retail (ABFRL), with a target price of ₹270 and a downside of 16%, citing concerns over the company's hefty debt load from acquiring multiple brands.

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Mixed Bag For Retail: Jubilant FoodWorks and Devyani International are Bernstein's top picks among restaurant firms, thanks to their strong positioning in under-penetrated markets like chicken and their efficient cost structures. The research firm gave Jubilant a target price of ₹800, with a 21% upside, while it handed Devyani International a target price of ₹210, with an 18% upside. It gave both an “outperform” rating.

On the flip side, Westlife FoodWorld, which operates McDonald’s in West and South India, is hampered by high capital expenditure for new store openings, the brokerage said. Bernstein rated it “underperform” with a target price of ₹700 — a downside of 19%.

Meanwhile, Sapphire Foods, the operator of Pizza Hut, faces what Bernstein describes as a “long and tough” road to recovery. It has been given a market-perform rating and a target price of ₹1,700, with a modest 5% upside.

Price Action: DMart’s share price was down 0.52% in early trade on Wednesday while Trent gained 2.53% and Aditya Birla Fashion Retail fell 0.9%.

Jubilant FoodWorks’ shares were trading almost flat while Devyani’s stock firmed 1.49%. Westlife’s share price went dipped 1.12% while Sapphire Foods lost 0.39%.

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