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Subscribe to Devyani International: Prabhudas Lilladher

Prabhudas Lilladher has come out with its report on Devyani International. The research firm has recommended to ''Subscribe'' the ipo in its research report as on August 02, 2021.

August 03, 2021 / 11:46 PM IST
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Prabhudas Lilladher IPO report on Devyani International

We recommend subscribe to IPO of DIL. We believe DIL is on the verge of a new growth phase for the company led by 1) KFC’s leadership in Chicken segment 2) strong brand recall and growth prospects of Pizza hut with just 297 stores (1300+ by Dominos) 3) Acquisition of 73 KFC stores of Yum over past 3 years 4) Aggressive expansion with addition of 90 stores in the last 6 months and likely hood of sustaining trend 5) move towards smaller delivery formats for KFC & Pizza Hut (share of delivery up from 50-70% between FY20/21) to achieve faster growth and higher margins and lower payback periods per store 6) Innovations in menus straddling across various price points, cuisines and consumer preference suited to the Indian palate 7) scale down in concession based stores in Airports and 61 loss making stores thus reducing drag on profitability.

Valuation and Outlook

In Q4FY21, DIL achieved Rs 4.3bn in revenue with 20% contribution margin and 15% EBITDA margin. DIL will repay Rs3.4bn debt from IPO and will fund its expansion through internal accruals. We believe the company will fund its expansion plans through internal accruals. We expect sustained growth momentum and success of delivery format in PH can enable a turnaround by FY23. DIL is being offered at FY24 EV/sales of 3.6x v/s 7.3x for JUBI and 3.6x Burger King. Subscribe.

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