Motilal Oswal's research report on Devyani International
Devyani International (DEVYANI) reported 10% YoY revenue growth led by 24% YoY store additions, offset by weak SSSG for both KFC & Pizza Hut (PH) and the devaluation of Naira (10% miss). Improvement in GM (+60bp YoY) cushioned the pre-Ind AS EBITDA margin decline (-360bp YoY) to 11.5% translating into an EBITDA/PAT decline of 16%/55% during the quarter. Due to the challenging environment, SSSG has remained weak, and recovery is expected to take a couple of quarters more with PH format further seeing the impact of intense competition. Strong store addition guidance of 250-275, expected recovery in SSSG for 2HFY24, and moderating inflation would enhance profitability. We model a revenue/ EBITDA CAGR of 19%/20% over FY23-25E.
Outlook
Reiterate BUY with an SoTPbased TP of INR220 (based on 50x/30x for KFC/PH on a pre-Ind AS EBITDA on Mar’25E).
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