Devyani Worldwide share worth: Festive demand to drive up gross sales, Devyani Worldwide shares can rise 16%, says Motilal Oswal

Citing sturdy festive demand to drive up gross sales, brokerage agency Motilal Oswal reiterated its purchase score on Devyani Worldwide with a goal worth of Rs 220, which reveals an upside potential of almost 16% from the present market worth of Rs 190.1 per share.

“Festive season (Diwali) gross sales have been good. Though the demand surroundings continues to look good, volumes in some pockets are getting affected resulting from excessive CPI inflation. Nevertheless, the general gross sales development is wholesome, led by worth will increase,” the brokerage agency mentioned

Devyani Worldwide reported gross sales development of 45% YoY to Rs 7,47.4 crore in Q2FY23. Whereas the adjusted revenue after tax (PAT) got here in at Rs 67.2 crore in 2QFY23 towards Rs 42.5 crore in 2QFY22.

Nevertheless, the consolidated gross margin of the corporate was down 80 bp YoY to 70.2%. The sequential gross margin was down 110 bp for KFC and 170 bp for Pizza Hut. EBITDA (post-IND AS) grew 34% YoY to Rs 1,65.5 crore. EBITDA margin contracted 180 bp YoY to 22.1%.

“2QFY23 gross sales and gross revenue have been broadly in line, whereas larger employees prices led to an EBITDA miss. Nevertheless, 2Q is seasonally the weakest quarter and a wholesome festive season gross sales outlook in 3Q (seasonally the strongest quarter) stays optimistic,”

mentioned.

Materials price pressures (hen, edible oil, and gasoline) are regularly receding and with a wholesome gross sales development outlook, EBITDA development in 2HFY23 is prone to be sturdy, the brokerage mentioned.

“With an growing give attention to hygiene, comfort, and innovation, QSRs, with their sturdy manufacturers, current an incredible funding case, given their low penetration ranges in India. Its sturdy pricing energy helps fight enter price inflation,” it added.

“We stay bullish on Devyani’s prospects on account of KFC’s sturdy model fairness and its development alternative, a gradual turnaround in Pizza Hut, pushed by the administration’s give attention to supply and improved retailer metrics, community growth throughout the portfolio and wholesome working profitability within the midteens (on a pre-Ind AS foundation),” Motilal Oswal mentioned whereas reiterating purchase goal at Rs 220 per share.

(Disclaimer: Suggestions, recommendations, views and opinions given by the consultants are their very own. These don’t characterize the views of Financial Occasions)