Accumulate Restaurant Brands Asia; target of Rs 142: Prabhudas Lilladher

Prabhudas Lilladher's research report on Restaurant Brands Asia

Restaurant Brands Asia (RBA) remains on a path to profitability in India with domestic business parameters improving in ADS, gross margins & profitability, while business restructuring in Indonesia is showing initial gains with expected cash breakeven by FY24. BK India saw revamp of value range with Rs99 meal, which led to higher transaction growth (10%+) and an increase in ADS to Rs126k (reported ADS – Rs120k). RBA reported stable EBITDA margins despite increase in marketing spends to support value meal offering and innovations. Indonesia operations is on a turnaround path with strategic focus to improve ADS with 1) relaunch/innovation in Whopper range 2) new range of chicken offerings 3) launch of desserts with global/local players and 4) focus on FSDT format & store rationalization. We believe RBA India operations are on track and should report low single digit pre IND AS EBITDA in FY24 with meagre profits in FY26.

Outlook

We believe Indonesia business will take time to turnaround with corrective measures implemented in BK across menu architecture & improved operations. We value the company at Rs 142 (Rs146 earlier) on SOTP basis. Accumulate.