Accumulate Devyani International; target of Rs 165: Deven Choksey

Deven Choksey report on Devyani International

Devyani International reported a mixed operating performance in Q2FY26, with revenue growth remaining steady, while profitability was impacted by deleverage, higher input costs, and elevated operating expenses. Revenue: Consolidated revenue increased 12.6% YoY (+1.5% QoQ) to INR 13,768 Mn in Q2FY26, driven by: Domestic KFC revenue at INR 5,723 Mn (+5.3% YoY)Pizza Hut revenue at INR 1,860 Mn (flat YoY)International business growth of 14.0% YoY (Revenue: INR 4,495 Mn)Store additions remained healthy with 39 NNUs, taking the total network to 2,184 outlets. Gross margin stood at 67.8% (-157 bps YoY, -42 bps QoQ), impacted by consolidation of Skygate and higher input inflation in key categories.

Outlook

We have rolled forward our valuation basis to Sept’27 estimates. We value Devyani at 19.0x Sept’27 EBITDA, implying a target price of INR 165. We reiterate our “ACCUMULATE” rating on the stock.

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