Motilal Oswal's research report on Devyani International
DEVYANI reported 20% YoY revenue growth (in line), aided by 28% store adds. SSSG remained weak for both KFC and PH. However, the decline in RM prices led to a 120bp gain in gross margin QoQ. Due to higher corporate G&A and employee expenses, EBITDAM contracted by ~290bp YoY to 20.5%, translating into 5% growth in EBITDA and a 39% decline in PAT. Due to the challenging environment, SSSG remained weak, and a recovery is expected to take a couple of quarters. The PH format is expected to recover gradually. Moreover, strong store addition guidance (275-300), expected SSSG recovery in 2HFY24, and moderation in inflation should boost profitability.
Outlook
We model revenue/EBITDA CAGRs of 24%/26% over FY23-25E. Reiterate BUY with an SoTP-based TP of INR220 (based on 43x/35x for KFC/Pizza Hut on a pre-Ind AS basis on Mar’25 estimates).
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