Devyani International gains 7%, hits over 6-month high on strong Q1 results

Shares of Devyani International (DIL) hit an over six-month high of Rs 188.40, gaining 7 per cent on the BSE in Wednesday’s intra-day trade after the company reported a strong performance across its core brands in the quarter ended June 2022 (Q1FY23).

The stock of the quick service restaurant (QSR) company was trading at its highest level since January 21, 2022. In the past one week, it has rallied 21 per cent as compared to a 4 per cent rise in the S&P BSE Sensex. The stock had hit a record high of Rs 199 on December 14, 2021.

DIL is the largest franchisee of Yum Brands in India and is among the largest operators of chain QSR in India on a non-exclusive basis. It operates 1,008 stores across more than 215 cities in India, Nigeria and Nepal, as of June 30, 2022. In addition, DIL is a franchisee for the Costa Coffee brand and stores in India.

In Q1FY23, the company’s revenue from operations grew 100 per cent year-on-year (YoY) to Rs 705 crore from Rs 353 crore in the year ago quarter. Reported earnings before interest, taxes, depreciation, and amortization (ebitda) rose 167 per cent YoY to Rs 164 crore, translating to an ebitda margin of 23.3 per cent during the quarter.

Margin has improved 590 bps YoY from 17.4 per cent in Q1FY22. However, it was down 100 bps sequentially from 24.3 per cent in Q4FY22. Profit after tax (PAT) stood at Rs 74.5 crore as against Rs 33.4 crore in previous year and Rs 75.9 crore in the preceding quarter.

The strong store additions coupled with early signs of demand revival supported growth during the quarter. This was also the first quarter without any Covid-related disruptions. The company recorded healthy cash flows and is debt-free on a net debt basis.

The encouraging performance delivered during the quarter came on the account of buoyant contribution from the core brands. KFC posted the highest average daily sales per store (ADS), surpassing pre-pandemic levels. Pizza Hut posted a 30 per cent plus same-store sales growth or SSSG with a sequential improvement in ADS.

On the economic front, the management is seeing early signs of recovery in consumer sentiment. The sectors like FMCG & retail are likely to report marginal volume growth over the next few quarters.

While input prices have remained elevated, well-established businesses with scale have been able to navigate the same with some pricing initiatives and protect margins. This bodes well for organized players across industries, the management said.