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Motilal Oswal Report
Devyani International Ltd. remained under brokerage radar after Motilal Oswal reiterated its 'Buy' rating on the stock and maintained a target price of Rs 160, implying an upside potential of about 35% from the current market price of Rs 118.
The brokerage's positive stance follows a healthy Q1 FY27 performance, with consolidated revenue rising 17% YoY to Rs 1,580 crore. Ebitda increased 24% YoY to Rs 255 crore, while margins expanded 100 basis points to 16.1%. Adjusted profit stood at Rs 17.8 crore compared with Rs 1.5 crore in the year-ago quarter.
Valuation and view
Management remains committed to improving ADS and profitability across the existing network across brands and will adopt a more cautious approach to future store openings across brands.
The merger of Devyani and Sapphire is expected to unlock meaningful scale benefits, improve unit economics through operating leverage and revised commercial terms, and enhance execution across brands and geographies.
The merger is expected to deliver recurring annual synergies of ~Rs 220 crore, driven by lower Pizza Hut operating costs, reduction in overall corporate overheads, and other operational efficiencies.
The brokerage estimates an Ebitda gain of ~Rs 500 million in FY28, considering weak QSR industry performance and any delay in the occurrence of synergy benefits,
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