Devyani International Ltd. share price target

We upgrade Devyani to BUY from Add, while raising our TP by ~18% to Rs200 from Rs170 (30x FY27E EBITDA vs 26x earlier). The upgrade is led by potential value creation in the likely acquisition of ‘Biryani By Kilo’ (BBK) and possible return of a mid-teen growth for the India business in FY26E (vs 7% in FY25).

• For Q3FY25, DEVYANI’s revenue was INR 12,944 Mn, a growth of 53.5% YoY and 5.9% QoQ, largely in line with our estimate.
• EBITDA for the quarter increased by 49.9% YoY (+10.3% QoQ) to INR 2,192 Mn, outperformed our estimate due to lower-than-expected employee costs. EBITDA margin stood at 16.9%, down by 41bps YoY but increasing by 68bps QoQ.

Devyani International’s (DEVYANI) consol. revenue grew 54% YoY (in line) in 3QFY25, led by a recent acquisition in Thailand. India revenue was up 10% YoY, despite 20% YoY store expansion, which was offset by weak samestore sales growth (SSSG) across brands.

We met with Mr. Manish Dawar, CFO of Devyani International (DIL), to discuss the current demand trends, the company’s growth outlook across business verticals, and its long-term strategy.

Devyani International Limited (DIL) posted another quarter of muted performance in Q2FY2025, with KFC’s and Pizza Hut’s SSSG declining by 7% and 5.7%, respectively. Revenue growth of 49% y-o-y was mainly led by the integration of Thailand’s KFC business.

For Q2FY25, DEVYANI’s revenue was INR 12,222 Mn, a growth of 49.1% YoY and a flat growth in QoQ, which is largely in line with our estimate.
EBITDA for the quarter increased to INR 1,987 Mn by 25.2% YoY (-11.0% QoQ). EBITDA underperformed our estimates.

DIL’s Q2 EBITDA was ~13% below our estimate, on margin miss in KFC and higher HO costs.

Devyani International Ltd’s (DEVYANI) consol. revenue grew 49% YoY (est. +42%), including the recent acquisition in Thailand.

For Q1FY25, DEVYANI’s revenue was INR 12,219 Mn, a growth of 44.3% YoY (+16.7% QoQ), which outperformed our estimates.
EBITDA for the quarter was INR 2,234 Mn, which grew by 28.8% YoY (+29.4% QoQ).

For Q4FY24, DEVYANI reported revenue of INR 10,471 Mn (+38.7% YoY/ +24.2% QoQ) outperformed our estimates, primarily driven by growth in KFC India (+11.3% YoY) and Costa (+36.3% YoY). Pizza Hut India declined 4.5% YoY.

DIL's Q4 EBITDA was 7-8% higher vs. our estimates, largely helped by strong
cost optimization as topline was weaker. Given a glut of weak consumption
trends, with 7/14% SSG decline in KFC/PH, a flat margin is commendable (vs.
250bps QoQ margin decline for Sapphire PH/KFC).

Devyani International (Devyani) reported 38.7% YoY revenue growth in
4QFY24, including the Thailand acquisition. The organic growth (exacquisition) is expected to be ~5% YoY (est. 7.5%) despite a 20% store growth.

For Q3FY24, DEVYANI’s revenue was INR 8,431 Mn, a growth of 6.7% YoY (+2.9% QoQ). The growth has been slower due to the impact of inflation on discretionary demand.

Devyani International DMCC (DID), Dubai, a subsidiary of Devyani International Limited (DEVYANI), has announced its entry into Thailand market by signing a Share Purchase Agreement to acquire a controlling interest in Restaurants Development Co., Ltd. (RD) Thailand, through acquisition of equity stake in RD and its holding companies. This will entail DEVYANI’s entry into the Quick
Service Restaurants (QSR)/ Limited Service Restaurants (LSR) market in Thailand.

For Q2FY24, DEVYANI’s revenue was at INR 8,195 Mn, a growth of 9.6% YoY but a decline of 3.2% QoQ. Revenue growth was supported by new store additions. Core brands registered a healthy performance, despite a challenging macro environment and low consumer sentiment. The quarter was impacted by seasonal weakness and an extended one month of ‘Shravan’ leading to a sizable part of the Indian population turning to vegetarian food consumption.

DIL’s consolidated revenue for the quarter stood at INR 8,466 mn, registering a healthy growth of 20.14% YoY and 12.14% QoQ. The brand contribution has increased to INR 1,545, registering a growth of 25.10% sequentially and margins stood at 18.2%, which showed a improvement of 180 bps QoQ.

Devyani International Ltd reported revenue growth of 27.8% on a YoY basis to INR 7549.8 million in Q4FY23. SSSG rate for KFC came at 1.9% in Q4FY23 as against 3% on a YoY basis. SSSG for Pizza Hut stood at -3.2% as against 2.3% in Q4FY22; whereas Costa Coffee reported SSSG rate at 42.6% in Q4FY23 as against 24% in Q4FY22.