Motilal Oswal's research report on Sapphire Foods
SAPPHIRE’s revenue grew 20% YoY (in line), led by steady store adds and KFC’s flat SSSG. Pizza Hut remained weak (-9% SSSG). A cool-off in inflation led to a sequential improvement of 60bp in margins, but low SSSG pulled down EBITDA margin (pre IND-AS 116) by 140bp YoY. As a result, EBITDA grew 7%, while PAT declined 35% YoY. SSSG remained weak due to the challenging business environment. In order to revive demand, the company has launched new products and increased its marketing investments in both brands.
Outlook
We reiterate our BUY rating with a TP of INR1,585, given the long term-growth opportunity and moderate valuations vs. QSR peers.
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