Coffee Day, Barbeque-Nation: No long queues yet to buy restaurant stocks

Thus far in 2024, stocks such as Coffee Day Enterprises, Speciality Restaurants, Barbeque-Nation Hospitality, Restaurant Brands Asia and Westlife Foodworld have lost up to 42%, shows ACE Equity data.

Even though you may have to wait in a queue before finding a seat in your favourite restaurant for a meal, or even tea/coffee, investors, it seems, are not queueing up in large numbers to buy stocks of listed restaurants.

Thus far in calendar year 2024 (CY24), stocks such as Coffee Day Enterprises, Speciality Restaurants, Barbeque-Nation Hospitality, Restaurant Brands Asia and Westlife Foodworld have lost up to 42 per cent, shows ACE Equity data.

In comparison, the Nifty 50 index has gained nearly 15 per cent during this period, while the Nifty Midcap 150 and Nifty Smallcap 250 indexes have surged nearly 28 per cent and 30 per cent, respectively.

 

 

Stocks of listed restaurants/food service companies, said G Chokkalingam, founder and head of research at Equinomics Research, have been a victim of investor’s preference for stocks of new-age companies.

“Pricing/valuation of these stocks was high and left nothing much on the table for investors at the time of listing. Some companies are still loss making. Investors want to see earnings visibility and reasonable valuations before they invest in a stock, which in some cases here was missing. I would still avoid these stocks at the current levels,” Chokkalingam said.

Meanwhile, to tap the booming consumption potential from a long-term perspective, Tata Asset Management had recently launched India’s first Tata Nifty Tourism Index fund. The index has 19 per cent weight/exposure towards restaurants besides hotels and resorts (32 per cent), airlines (19 per cent), tour, travel-related services (16 per cent), airports and airport services (10 per cent), and luggage (3 per cent).

“One cannot paint the entire sector with the same brush. Coffee Day had its own set of problems after the promoter V G Siddhartha passed away. Barbeque-Nation Hospitality’s theme/idea was novel long ago and not as much now. These restaurants have to keep reinventing themselves. Among the lot, I would still prefer Speciality Restaurants,” said Ambareesh Baliga, an independent market analyst.

Food delivery segment

The food delivery segment, on the other hand, has been thriving. Swiggy's food delivery segment has continued to grow with around 1.1x expansion in user base and a nearly 1.1x expansion in number of restaurant partners, the company said in its annual report for 2023-24.

The expansion in Swiggy's gross order value (GOV) from Rs 277 billion in fiscal year 2022-23 (FY23) to Rs 350 billion in FY24 (up 26 per cent YoY), it said, was catalysed by an increase in average order value (AOV) due to increased premium offerings and larger basket sizes.

Their total orders, as per the 2023-24 annual report, also grew by 17 per cent, driven by increasing user base and ordering frequency. Gross revenue jumped 30 per cent from Rs 95 billion in FY23 to Rs 123 billion in FY24.

While Swiggy prepares to list at the bourses, Zomato's stock, on the other hand, has surged around 96 per cent thus far in CY24 to Rs 243 levels. The latter's success in the months ahead, according to analysts at CLSA, is attributed to Blinkit, which they feel is a key ingredient in Zomato’s recipe for growth.

They expect a 139 per cent increase in Blinkit’s gross order value (GOV) in FY25, rising 83 per cent YoY in FY26 and 65 per cent YoY in FY27. Growth in GOV, CLSA believes, should largely come from higher monthly transacting users, a 5 per cent YoY increase in monthly transaction frequency and flat average order value.

"We raise our target price for Zomato from Rs 350 to Rs 353, but cut FY25-26 net profit estimates up to 12 per cent to reflect Zomato’s Paytm ticketing acquisition and the resulting lower cash and other income in the near term," their analysts wrote in a recent report.