Buy Restaurant Brands Asia; target of Rs 160: Motilal Oswal

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Motilal Oswal's research report on Restaurant Brands Asia

The recovery in average daily sales (ADS) in 1QFY23 was better than our estimate, leading to better than expected sales growth. While gross margin was in line, unusually high marketing spends, which will normalize going forward, pulled down its EBITDA performance. With ADS rising further in Jul’22 (INR131k) v/s INR120k in 1QFY23, the sales momentum in India remains encouragingly strong. The management sees possible upgrades to its SSSG guidance of 25% for the India business in FY23. It maintained the likelihood of a full recovery in Indonesia ADS by Sep’22. The ADS recovery in the Indonesia business stood at 78% in Jul’22 v/s 69% at the end of 1QFY23.

Outlook

The response to BK Café has been good, and the management is targeting 250 outlets by the end of FY23 as compared to its earlier guidance of 200.  We maintain our Buy rating on the stock.

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Restaurant Brands Asia - 140822 - moti