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

Prabhudas Lilladher's research report on Restaurant Brands Asia

RBA reported SSSG of 2.8%, driven by its continued focus on strengthening the value proposition and healthy store traffic. ADS stood at Rs 119k, reflecting stable consumer traction. However, adjusted loss widened to Rs202mn, due to ~18% YoY increase in manpower costs and higher overheads. This was partially offset by higher other income, which rose from Rs71mn to Rs 115mn. The Indonesia business remained a drag, with sales declining 3.9% YoY, though RBA highlighted early signs of demand recovery supported by a stabilizing geopolitical environment and the completion of store rationalization. RBA also seems open to divesting the Indonesia business if a suitable opportunity arises. We believe exit from Indonesia could allow RBA to unlock value and reallocate capital towards its India operations, which offer a more stable macro backdrop and a long runway for growth.

Outlook

We estimate India business to turn PBT from operations positive by FY28 only. Near term outlook looks cautiously optimistic as demand revival on the account of GST reforms and cost control hold key to improving margins. Retain Accumulate with SOTP based target price of Rs 87 with back ended returns.

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