KFC operator Devyani International Ltd. (DIL) shares rallied five percent during the afternoon session on April 15, as domestic brokerage Kotak Institutional Equities upgraded the counter to ‘buy’.
Kotak bumped up its rating on the firm to ‘buy’, from ‘add’ earlier, while hiking its fair target value on shares to Rs 190 from Rs 175. This indicates an upside of 22 percent from the previous session’s closing price.
Kotak noted that in FY25, Devyani’s performance was impacted by persisting weakness in QSR demand and possible execution issues following key management exits. The brokerage noted that shares of Devyani corrected by about 20 percent over the course of the last three months, owing to weak operating print on an absolute basis and relative to peers.
However, according to Kotak, the quick-service restaurant (QSR) operator is poised for improved growth in FY26. The brokerage expects same store sales growth (SSSG) to pick up, as a result of a weak base over the past 8/9 quarters and improving demand.
“Even as Domino’s (India) SSSG acceleration to 11 percent in H2FY25 from one percent in H1 is largely company-specific, it provides a more optimistic outlook for the QSR industry demand in FY26,” said Kotak.
Further, the brokerage argued that the reduction in personal income tax augurs well for QSR, in our view.
Despite short-term hindrances, including a weak Q4FY25E, KFC India’s fundamentals remain strong, backed by firm brand equity, financially attractive units, and significant growth potential.
With only 1,225 stores as compared to Domino’s 2,179 stores, while retaining less than 5 percent share in India’s chicken consumption, KFC is well-positioned for expansion; DIL plans to add approximately 100 stores annually over the next three years with a CAGR of 13 percent.
A further upside can be observed from continued portfolio expansion through both organic store rollouts and inorganic acquisitions. Backed by RJ Corp’s appetite for scaling new businesses and a solid track record of creating shareholder value, these initiatives enhance the long-term growth and re-rating potential of the company.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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