Brokerages remain positive on Devyani International, with improving momentum at KFC India and the proposed merger with Sapphire Foods emerging as key growth drivers. However, the recovery at Pizza Hut remains uncertain, while rising input costs and subdued discretionary spending could weigh on the near-term outlook. Five brokerages have retained positive ratings on the stock, but Citi and Jefferies have lowered their target prices.
Devyani International Q2: Key Results Highlights (Cons, YoY)
- Net loss at Rs 24.2 lakh versus loss of Rs 21.9 crore.
- Revenue up 10.4% to Rs 1,519 crore versus Rs 1,377 crore.
- Ebitda up 20.9% to Rs 233 crore versus Rs 192 crore.
- Margin at 15.3% versus 14%.
What Brokerages Said
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JPMorgan — Overweight
JPMorgan maintained its Overweight rating on Devyani International, with a target price of Rs 127. The brokerage sees scope for KFC India to sustain mid-single-digit same-store sales growth, supported by its value-focused offerings and continued expansion of its store network. However, the recovery at Pizza Hut remains uncertain, with the brand needing stronger product innovation and a more effective strategy for promotions and marketing to revive sales. JPMorgan sees the Sapphire Foods merger as an important medium-term trigger, with successful integration and margin recovery likely to determine the benefits.
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Goldman Sachs — Buy
Goldman Sachs retained its Buy rating on the stock, with a target price of Rs 140. The brokerage expects KFC India's same-store sales growth to improve to around 6% in the December quarter of fiscal 2027, partly supported by shifts in the festive calendar. It expects selective price increases and lower promotional spending to help the company manage input cost inflation without putting excessive pressure on margins. Improving profitability across owned brands and progress towards the Sapphire merger also support its positive outlook.
Citi — Buy
Citi maintained its Buy rating but reduced its target price to Rs 174 from Rs 186, a cut of Rs 12. The brokerage sees improving sales momentum at KFC, with value offerings priced at Rs 99 and Rs 149 helping the brand attract customers. Citi also indicated concerns over Pizza Hut, as the brand continues to face operational challenges. The brokerage also suggested that planned price increases could help offset higher input and wage costs, although a sustained recovery remains important. Citi believes the Sapphire merger, expected to be completed by March 2027, and an improvement in consumer demand could support a re-rating.
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Bernstein — Outperform
Bernstein maintained its Outperform rating, with a target price of Rs 160. The brokerage sees the latest quarter as steady but believes more meaningful triggers for the company lie ahead. Unlike other brokerages, Bernstein pointed out KFC India's performance to be relatively softer, partly owing to seasonal factors, while Pizza Hut continues to report losses. However, the brokerage believes a broader reset of Pizza Hut's business is around the corner and is likely to be linked to the merger process. Meanwhile, the improving performance of other brands offers some support to the overall business.
Jefferies — Buy
Finally, we have Jefferies, which also retained its Buy rating but lowered its target price to Rs 150 from Rs 160. The brokerage sees strengthening momentum at KFC India, where management expects mid-single-digit same-store sales growth. However, it remains cautious about the pace of recovery at Pizza Hut, with value offerings and menu innovation likely to be important in improving performance. Jefferies sees the Sapphire merger, targeted for March 2027, as a potential catalyst but believes near-term discretionary demand and cost pressures remain risks.
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