Emkay Global Financial's research report on Sapphire Foods
In line with peers, Sapphire reported weak SSG print at 0%/-20% for KFC/PH that drove a 7% EBITDA miss on estimates. Near-term commentary was muted, on shift of veg-consumption days to Q3 and sporting events in the base as well— a negative read-through for peers, in our view. Sapphire remains confident of 20-25% EBITDA CAGR in KFC over FY23-26 and revival efforts are under way for PH, with product innovation, store refurbishments and import of kitchen management solution Dragon Tail from Yum! Brands (USA). Company also expects gradual normalization of the spike in competitive intensity with low RoIs for smaller pizza-franchisees. Sri-Lanka is seeing encouraging recovery from the macro-led trough. We clip FY24-26E EBITDA by 7-11%, on subdued demand trend.
Outlook
Stock has seen a 1M correction of ~10%. We maintain BUY, with TP pruned to Rs1,550/share, on significant valuation gap of 30-35% with peers, despite similar performance and improving growth prospects in Sri-Lanka.
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