Brokerage firm Motilal Oswal Institutional Equities has initiated coverage on Devyani with a Buy rating and target price of Rs 190, driven by KFC’s strong brand equity and operating metrics, increasing focus on delivery by Pizza Hut driving its turnaround, and robust growth in both these brands led by rapid network expansion.
Devyani International had made a stock market debut on August 16, 2021. The Global Index provider, MSCI, had Devyani International in MSCI India Domestic Small Cap Index from November 30, 2021.
At 12:13 pm; the stock was trading 11 per cent higher at Rs 179, as compared to 1.5 per cent gain in the S&P BSE Sensex. The trading volumes at the counter jumped multiple-fold with a combined 18.85 million shares representing 1.6 per cent of total equity of Devyani International changing hands on the NSE and BSE.
Devyani International is the largest franchisee of Yum Brands in India and one of the top operators of chain QSRs. It collaborates with Yum across various aspects of its operations for KFC and Pizza Hut for the franchisor’s brand protection and management including product innovation and development, brand strategy and technology initiatives. In addition, Devyani also has a franchisee for the Costa Coffee brand and stores in India.
For July-September quarter (Q2FY22), the company had posted robust set of numbers with a consolidated profit after tax (PAT) of Rs 46.6 crore, as compared to a net loss of Rs 65.5 crore in Q2FY21. The company's revenue from operations more-than-doubled or was up 124 per cent year- on-year (YoY) to Rs 516 crore, on strong business recovery post Covid second wave. Earnings before interest, tax, depreciation and amortization (ebitda) grew 175 per cent YoY at Rs 123 crore, and margins improved to 23.9 per cent from 19.49 per cent in Q2FY21.
The company’s management said that the foodservice industry is expected to grow at a CAGR of 12 per cent to 15 per cent in future. QSRs being the largest constituent of this segment will be a key beneficiary and will lead this growth. Devyani International with its multiple strong and well recognized western and Indian QSR brands stand to gain the most as the company continued to expand its footprint in India, the management said.
“We have seen a great recovery on the demand side as the Covid 19 restrictions ease and the vaccination coverage improves. Leveraging this demand momentum across our markets, we expect to deliver a strong operational and financial performance,” the management said.
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