Hold Restaurant Brands Asia; target of Rs 109 Prabhudas Lilladher

Prabhudas Lilladher recommended hold rating on Restaurant Brands Asia with a target price of Rs 109 in its research report dated October 29, 2024.

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October 30, 2024 / 12:56 IST

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Prabhudas Lilladher's research report on Restaurant Brands Asia

Restaurant Brands Asia (RBA) posted below estimate revenue with -3.0% SSG led by subdued demand environment, however gross margins expanded by 23bps YoY led by procurement efficiencies. EBITDA margins increased by 23bps aided by 100bps lower adspends YoY. However excluding cut in adspends and sharp jump in other income, PBT loss would have been Rs246mn. Burger King continues to focus on value strategy with combos (2 Pizza puff 2 veg Burgers at Rs79, Chicken at Rs99) and value meals at Rs99 to drive traffic in a tepid demand environment. Indonesia business saw yet another muted quarter (-18% sales growth) due to sustained geopolitical issues and scale down in number of BK stores. India business is focusing on 1) steady improvement in store traffic 2) sustained benefits from value meal and 3) strong growth in smaller towns. RBA expects Indonesia business to show recovery post 3Q led by 1) Improving sentiments with time 2) new range of chicken offerings 3) desserts scalability 4) aggressive marketing and 5) sustained traction with higher ADS in Popeyes. Near term outlook looks hazy as higher food inflation is affecting demand.

Outlook

We value the company at Rs 109 (129 earlier) on SOTP basis. We cut the rating from Accumulate to Hold.

For all recommendations report, click here