Reduce Devyani International; target of Rs 115 : HDFC Securities

Reduce

HDFC Securities' research report on Devyani International

Devyani reported yet another operationally soft print on weak SSSG—revenue growth of 20% YoY with 28% store growth. SSSG was weak for both KFC/PH at -0.9/-5% (Sapphire 0/-9%) due to a depressed consumer spending environment. The stabilizing RM basket, general QoQ improvement and price increases in April’23 (for KFC) enabled sequential improvement in margin. However, they remained under pressure YoY. KFC/PH ROM fell by 130/740bps YoY to 21.1/10.1% (Sapphire +50/-740bps). Management has lowered its PH store opening guidance to 70-75 (from 100) as it looks to cumulatively open 275-300 stores in FY24.

Outlook

We expect near-term pressure on both demand and margins to persist. We maintain our EPS estimates and value Devyani at 50x P/E on Sep’25 EPS to arrive at a TP of INR 115. Maintain REDUCE.

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Devyani International - 05 -08 - 2023 - hdfc