Company Profile
Devyani International is the largest franchise of YUM brands in India. The company
also operates franchise outlets of renowned brands Pizza Hut and KFC in India, Nigeria
and Nepal. Company also has franchisee rights of Costa Coffee brand in India. They
have in-house established brands Vaango and Food Street.
Robust Store expansion key to sales growth
Company has achieved an all time high store count of 1008 stores as of Q1 FY23.
It has newly added 27 KFC stores, 23 Pizza Hut stores and 14 Costa Coffee stores,
a total of 70 new stores added this quarter. The total brand-wise store count for
KFC is now 391 stores, pizza Hut 436 stores and 69 Costa Coffee stores. The city
reach is now 215. Company has achieved a strong traction in sales in Q1 FY23 (2x
y-o-y) , supported by growth in Dine-in channels. KFC stores contributed Rs 425
Cr out of total Rs 703 Cr to the sales of Q1FY23 whereas, Pizza Hut contributed
Rs165 Cr. The Pizza Hut revenues grew by 71% YOY basis, KFC revenue grew by 109%
YOY basis.
Cooling input prices & rational overall cost management to help in maintaining
margins
Company’s business was hit by pandemic in FY21, followed by global crisis
in FY22, leading to pressure on margins ( steep surge in raw material prices). To
maintain margins, the company increased the prices by 9% in Q1 FY23. However, prices
of edible oil and chicken have now cooled off and stabilized. Strict overall cost
management also helped the company in achieving an all-time high EBITDA margin of
23% in FY22.
Product innovation to grow customer reach
Company launched new products across its core brands. In KFC it launched popcorn,
nachos and products giving flavour of tender chicken experience. While Pizza Hut
launched fun pizza range. Over the years Pizza Hut has tried the strategy of domestication
where the brand is trying to adapt a more closure Indian taste for its customers
with launch of various toppings in Indian flavours such as Tandoori, paneer, momo
pizza, etc.
Company | Revenue | EBITDA | EBITDAM% | PATM% | ROCE% | ROE% | EPS |
---|---|---|---|---|---|---|---|
Jubilant Foodworks | 4396 | 1108 | 25% | 10% | 35% | 22% | 31.9 |
Devyani International Ltd. | 2084 | 300 | 14% | 7.5% | 44% | 23% | 1.3 |
Sapphire Foods India Ltd. | 1722 | 305 | 19% | 3% | 15.7% | 4.6% | 7.3 |
Westlife Development Ltd. | 1577 | 217 | 13% | -0.1% | 11.9% | -0.4% | -0.1 |
The peer comparison is based on FY22 financials, All figures in Rs Cr except EPS in Rs & PE multiple is x times.
We believe Devyani International has a strong potential in attracting higher customer base then its existing levels. The strong brand recall of KFC and Pizza Hut will aid company in attracting more customers. It is a dominant player for chicken-based food items. Over the years the demand for chicken products has increased & is growing at a fast pace. Costa Coffee prices are estimated to be near to Starbucks, therefore the popularity of this brand & sales pick up here may be slow & gradual. Overall pace of addition of new stores & ramp up in per store revenue would be key monitorable sin near to medium term.
At CMP of Rs194, based on our estimates, the stock is trading at 38x its FY 25 earnings we initiate a buy call at a target price of Rs229 based on our 45x PE multiple of FY25 earnings.
Rs in Crores | Net Sales | EBITDA | PAT | EPS |
---|---|---|---|---|
FY21 | 1135 | 188 | -74 | -0.5 |
FY22 | 2084 | 467 | 156 | 1.3 |
FY23E | 3334 | 767 | 367 | 3.04 |
FY24E | 4335 | 1019 | 477 | 3.96 |
FY25E | 5852 | 1340 | 614 | 5.1 |