Buy Restaurant Brands Asia; target of Rs 135: Sharekhan

Sharekhan's research report on Restaurant Brands Asia

Restaurant Brand Asia (RBA) posted muted numbers in Q3FY2023 with consolidated revenues growing by 21% y-o-y to Rs. 526 crore; EBITDA margins declined by 526 bps y-o-y to 5.6%; SSSG for India business moderated to 9%. The management has guided for 25% SSSG for FY2023 and 7-10% SSSG for FY2024; it targets 67% gross margins in FY2024 and 68% gross margins in FY2025 for India business. India business (pre-Ind AS) EBIDTA margins expected to improve to high single digits in FY24 and will improve to double digit in FY25. Indonesia business will be EBIDTA positive by early FY25.

Outlook

The stock has corrected by 22% from its six months high and is trading at 18.1x/13.6x its FY2024E/25E EV/EBIDTA. With a favourable risk-reward, we maintain a Buy on the stock with a revised PT of Rs. 135.

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