Betting On A Pizza Hut Comeback? Here's How Brokerages Are Assessing The Devyani-Sapphire Merger
While both brokerages remain positive on execution and synergy visibility, they underscored that a sustained pickup in consumer demand will be critical for store expansion.
The proposed merger between Devyani International and Sapphire Foods has drawn a largely constructive response from brokerages. Both Macquarie and Goldman Sachs have highlighted improved operating control, a clearer Pizza Hut turnaround path, and meaningful cost synergies. However, a key variable that both have flagged is the demand recovery.
Macquarie has reiterated an Outperform rating on Devyani, at the unchanged target price of Rs 200, arguing that the merger brings together complementary geographies and capabilities under a unified operating structure. Meanwhile, Goldman Sachs maintains a Buy rating on Devyani with a 12-month target price of Rs 170.
Of the 26 analysts covering this stock, tracked by Bloomberg, 17 have a 'buy' call, four have a 'hold' stance, five have a 'sell' rating on Devyani International, with a potential upside of 26.25%.
A central pillar of Macquarie's thesis is Pizza Hut, where management is guiding towards low double-digit margins in the near term. The longer-term ambition, though, is of converging towards KFC’s mid-teen margin profile of 16-19%.
Macquarie estimates synergy benefits of Rs 2.1–2.25 billion, net of capability-building costs, with roughly 60% expected to accrue in the first year after the merger and full benefits by the second year. The brokerage highlighted the strategic shift of key functions like including supply chain and technology for both brands, and innovation and marketing for Pizza Hut, moving in-house from Yum!.
Devyani's management expects these capabilities to be fully developed by mid-2026, supported by investments in leadership and a global technology vendor. The deal structure also includes a 10-year reduction in Pizza Hut royalty, and a planned sale of 18.5% of Sapphire promoter stake at a floor price of Rs 280 per share to meet Yum!’s promoter holding requirements.
Goldman Sachs, which maintains a Buy rating on Devyani with a 12-month target price of Rs 170, focused on the operational flexibility unlocked by the merger. It expects Pizza Hut to turn contribution-margin positive in the first year post-merger, aided by royalty waivers, lower store addition commitments, and the ability to shut unprofitable outlets.
Goldman also pointed to potential upside at KFC, where the transition of technology and supply chain control could support same-store sales growth, particularly in the delivery channel, which accounts for 40–45% of sales.
While both brokerages remain positive on execution and synergy visibility, they underscored that a sustained pickup in consumer demand will be critical for store expansion and earnings momentum.
