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Dolat Capital Report
Sapphire Foods India Ltd.'s Q1 FY24 results were ahead of our estimate. The company reported 19.8% revenue growth helped by 21.2/11.7% growth in KFC/Pizza Hut while Sri Lanka sales growth improved to 27% in Indian rupee terms.
Sri Lanka business reported 9% growth in Sri Lankan rupee terms but 27% in INR terms – due to appreciation in local currency. Also, the business reported 9% Ebitda decrease in LKR terms, it increased 8% in INR. Going ahead, Sri Lanka business would benefit from favorable base.
Sapphire Foods opened 35 new stores during Q1 (17 KFC, 16 Pizza Hut and 1 KFC and pizza Hut in Maldives), taking the total store count to 778. The company would continue to add 130-160 stores every year going ahead with a cluster based approach and penetration strategy.
However, in case of continuous slowdown, Sapphire Foods would slow down store addition pace.
We have reduced our FY24E earnings per share estimates to Rs 24.4 to factor in higher tax incidence. However, we have maintained our FY25E EPS estimates at Rs 31.1 as it factors in the expected improvement.
We arrive at a target price of Rs 1,246 (40 times FY25E EPS). Maintain 'Sell'.
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