Devyani International Q2 Review: Sluggish Demand Impacts Growth, Says Dolat Capital Maintaining 'Sell'

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Dolat Capital Report

As Devyani International Ltd.’s operating performance and profitability were below our estimate, we have downward revised our FY26/27E Ebitda by 4.8/4.5% and introduced FY28E estimates.

Though the base for Pizza Hut and KFC would become favorable in the ensuing quarters, overall slowdown is expected to pressurise profitability.

We value the stock at 18x FY28E EV/Ebitda, arriving at a target price of Rs 147 (Rs 153 earlier). Reiterate ‘Sell’ rating.

Devyani’s revenue was in line, while Ebitda and adjusted profit after tax were below our estimates. Revenue grew by 12.6% including the Thailand (ex-Thailand up 4.2% YoY) led by outperformance from own brands (incl. Vaango, Biryani by Kilo and Goila Butter Chicken) on a favorable base of Q2 FY25 and a double-digit growth in the international markets. However, the same-store sales growth for KFC/ Pizza Hut (PH) were -4.2/-4.1% respectively.

The company added 30/3/2 stores in KFC/PH/Costa Coffee and 2/2 in Thailand/Nepal, respectively, taking the total store count to 2,184.

Furthermore, the company rolled out six tea live outlets during the quarter.

Going ahead, the company will continue to expand KFC stores, while the store expansion for Pizza Hut will remain muted.

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