Buy Devyani International; target of Rs 220: Motilal Oswal

Motilal Oswal's research report on Devyani International

Devyani International Ltd. (DIL) has entered the Thailand KFC market through the acquisition of an equity stake in Restaurants Development Co. Ltd. Thailand (RD) for INR3.4b in cash. The deal value represents 0.9x FY23 EV/sales and 8x FY23 EV/EBITDA. RD has earlier explored to sell the KFC business at around USD 300m but the process was shelved due to covid. DIL has acquired the company at much reasonable valuation of USD 130m. In the combined entity, RD would account for ~30% of total revenue and ~26% of Restaurant EBITDA. This acquisition will position DIL as a key player in the Thailand QSR market and will pave the way for additional growth and expansion. In international markets, DIL is already present in Nigeria and Nepal. The acquisition is expected to be completed by 31st Mar’24.

Outlook

We reiterate our BUY rating with an SoTP-based TP of INR220 (based on 50x/30x for KFC/Pizza Hut on a pre-Ind AS basis on Mar’25 estimates).

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