Buy Sapphire Foods; target of Rs 415: Motilal Oswal

Buy

Motilal Oswal's research report on Sapphire Foods

Sapphire Foods India (SAPPHIRE) reported revenue growth of 14% YoY (in line) in 3QFY25, driven by a 13% YoY increase in store count. KFC revenue grew 12% YoY, supported by 22% store expansion, though offset by a 3% decline in same-store sales (est. -3.5%). Pizza Hut (PH) revenue rose 10% YoY, with 6% new store additions and 5% SSSG (est. 4%). Sri Lanka posted strong revenue growth of 30% YoY (+15% in LKR), driven by 14% LKR SSSG and 5% store growth. Gross margin contracted 30bp YoY and 20bp QoQ to 68.6% (est. 68.8%). KFC’s ROM was down 190bp YoY/up 170bp QoQ at 18.2%, impacted by operating deleverage. PH’s ROM expanded 10bp YoY to 4.7%, and Sri Lanka’s ROM improved 360bp YoY to 17.8%. Consolidated restaurant EBITDA pre-Ind-AS grew 9% YoY to INR1,164m (in line), though margins declined 60bp YoY to 15.4% (13.8% in 2QFY25). Pre-Ind-AS EBITDA rose 12% YoY to INR 811m, with a marginal 10bp contraction in margin to 10.7% (8.5% in 2QFY25).

Outlook

However, ADS and SSSG recovery remain key monitorables, as they are critical to improving unit economics. We reiterate our BUY rating on the stock with a TP of INR415 (30x Dec’26 pre-IND-AS EV/EBITDA).

For all recommendations report, click here

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Sapphire Foods - 07022025 - moti