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Motilal Oswal Report
Barbeque Nation Hospitality Ltd reported a weak performance in Q2 FY23. Its revenue and Ebitda declined 3% and 24% YoY, respectively, primarily due to an 11% decrease in same-store sales.
Improvement in gross margin (+190 basis points QoQ) cushioned the decline in Ebitda margin, which contracted 460 bp YoY. The net store additions were subdued in Q2.
Given the soft demand environment, management has cut its new store addition guidance to four (net) in FY24 from 31 in FY23, shutting down lossmaking stores.
Barbeque Nation plans to revive its store expansion strategy in FY25. It indicated that the last fortnight showcased early signs of recovery, which will be key to reviving the store-level profitability.
The stock is currently trading at 14 times FY25E enterprise value/Ebitda (pre-Ind-Accounting Standard).
We reiterate our 'Neutral' rating on the stock with a target price of Rs 650, based on 15 times FY25E EV/Ebitda (pre-Ind-AS).
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