Accumulate Restaurant Brands Asia; target of Rs 87: Prabhudas Lilladher

Prabhudas Lilladher's research report on Restaurant Brands Asia

Restaurant Brands Asia (RBA) posted 2.6% SSG in Q1 led by focus on value proposition led by healthy store traffic with ADS of 120k. Adj loss at Rs116mn went up due to higher manpower cost and overheads partly neutralized by higher other income from 57mn to Rs276mn. Indonesia business reported 6.9% decline in sales however green shoots in demand recovery are visible with stabilizing geopolitical scenario and end to rationalization of stores. RBA’s India strategy is centered around 1) Value focus with combos (2 veg Burgers at Rs79, Chicken at Rs99, and Café at Rs99) 2) digital driven ordering 3) cost reduction in delivery business 4) control over overheads and 5) gradual increase in ADS of Café business from current levels of Rs13k led by innovation and combo offerings. Indonesia is focusing on 1) zero store openings 2) lowering of overheads 3) menu innovations in chicken with focus on local flavors and driving efficiencies in procurement by leveraging Indian operations.

Outlook

We estimate India business to turn PBT from operations positive by FY28 only. Near term outlook looks cautiously optimistic as demand revival and cost control hold key to improving margins. Retain Accumulate with SOTP based target price of Rs87 with back ended returns.

For all recommendations report, click here