Devyani International's Target Price Cut By Citi After Slow Q4 Same Store Sales Growth

Citi maintained a 'buy' rating while slashing price target for Devyani International Ltd. to Rs 209.00 from Rs 210, after noting a slowdown in same store sales growth for KFC.

However, the research firm forecasts pacing up of SSG and remarked that "worst was behind for KFC". The decline in SSG was attributed to primarily two factors—impact of bird Flu in Andhra Pradesh and Telangana, and impact of geopolitical situation in West Bengal and Kerala. It observed that SSG was positive in states like Karnataka, where external triggers were absent.

The sky looks clearer from here on for Kentucky Fried Chicken, according to Citi, as it predicts margin expansion to 20% and an addition of 110-120 KFC stores.

The brokerage maintained a 'buy' call on the stock. "Given slowdown in discretionary spending and high operating leverage in QSR businesses, near term earnings will likely remain volatile. However, we expect, QSR to be the biggest beneficiary of uptick in consumer sentiment/discretionary spending."

Jury is still out on the outlook for Pizza Hut after closure of 14 stores.

The largest franchisee of Yum! announced its Q4 results on Friday and reported a significant narrowing of its net loss to Rs 16.76 crore for the March quarter of fiscal 2025. This marks a substantial improvement from the net loss of Rs 48.95 crore reported in the corresponding January-March period of the previous year.

The quick service restaurant operator also reported a 15.8% uptick in revenue from operations, reaching Rs 1,212.6 crore in the March quarter, up from Rs 1,047.07 crore in the same quarter last year.

Total expenses for the period rose by 13.5% to Rs 1,247.90 crore. Devyani International's total income, which incorporates other income, stood at Rs 1,225.77 crore, reflecting a 15.5% year-on-year increase.

In financial year 2025, Devyani International added 257 new stores, bringing its total store count to 2,039 as of March 31, 2025, across its markets in India, Thailand, Nigeria, and Nepal.

"DIL has built a strong presence across QSR formats in India (largest chicken and second largest pizza player in India, in our view) and given strong store economics, presence across cuisines (pizza, burger, chicken and sandwiches, coffee) and brand recall, it is well positioned to capitalise on the structural tailwinds of increasing eating out/ordering-in frequency, urbanisation, shift from unorganised to organised and chain restaurant players, etc.," Citi said.