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Buy Devyani International; target of Rs 225: Motilal Oswal

Motilal Oswal is bullish on Devyani International recommended buy rating on the stock with a target price of Rs 225 in its research report dated August 03, 2022.

August 05, 2022 / 10:07 PM IST
 
 
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Motilal Oswal's research report on Devyani International


DEVYANI’s 1QFY23 result was in line at the operating level. Despite material cost inflation, overall gross margin fell only 10bp YoY and 20bp QoQ as a result of timely price increases. These hikes have been well absorbed, as highlighted in our Apr’22 channel check update. For KFC, average daily sales (ADS), at 127k, surpassed 3QFY22 levels, with healthy profitability metrics, given the sharp inflation in chicken costs. While Pizza Hut continues to report a sequential improvement in brand contribution margin, ADS is still lower than our estimate. With an increasing focus on hygiene, convenience, and innovation, QSRs, with their strong brands, present a great investment case, given their low penetration levels in India. Strong pricing power helps combat input cost inflation. DEVYANI remains among our top picks in this space. We maintain our Buy rating.



Outlook


We maintain our Buy rating with a SoTP-based TP of INR225 per share (Jun’24E EV/EBITDA of 45x/35x for KFC/Pizza Hut on a pre-Ind AS basis).

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Devyani International - 040822 - moti

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first published: Aug 5, 2022 10:04 pm
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