Accumulate Restaurant Brands Asia; target of Rs 132: Prabhudas Lilladher

Prabhudas Lilladher's research report on Restaurant Brands Asia

Restaurant Brands Asia (RBA) Mgt has given an optimistic outlook as domestic business parameters are improving in terms of ADS & profitability and business restructuring in Indonesia should provide breakeven by FY24. RBA reported EBITDA margin slippage of 136bps QoQ due to increase in operating expenses and demand slowdown which resulted in ADS dropping to Rs108k. Indian unit has seen launch of Rs99 value meal, new variants in Whopper and Masala Chai in BK Café which is expected to increase throughput in coming years. Indonesia operations continue to have lower ADS vs pre COVID; new strategy is expected to improve ADS with 1) relaunch/innovation in Whopper range 2) increased focus on chicken offering 3) launch of desserts and 4) focus on FSDT format & store rationalization.

Outlook

We believe RBA India operations are on track and should report low to midsingle digit pre IND AS EBIDTA in FY24 with meagre profits in FY26. We believe Indonesia business will take time to turnaround despite corrective measures implemented in FY23 given initial losses in Popeyes (25 stores in FY24). We value the company at Rs 132 (Rs121 earlier) on SOTP basis. Maintain ACCUMULATE.

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