Purchase Sapphire Foods; Emkay Global Financial targets Rs. 1550

 Purchase Sapphire Foods; Emkay Global Financial targets Rs. 1550

In its research report dated November 02, 2023, Emkay Global Financial expressed its bullishness on Sapphire Foods and suggested a buy recommendation on the company, with a target price of Rs 1550.

The Sapphire Foods research report from Emkay Global Financial

Sapphire's dismal SSG print for KFC/PH was reported at 0%/-20%, in line with rivals, which resulted in a 7% EBITDA miss on forecasts. of our opinion, the near-term comments was subdued and included negative read-through for peers on the shift of vegetable consumption days to Q3 and sports events in the base. Sapphire is still optimistic about a 20–25% EBITDA CAGR in KFC over FY23–26. Reviving PH via food innovation, store renovations, and the import of Yum! Brands' (USA) Dragon Tail kitchen management system are also underway. The company anticipates that the surge in competition intensity will gradually level down, with lower returns on investment for smaller pizza franchises. Sri Lanka is making a remarkable comeback from the macroeconomic downturn. We reduce FY24–26E EBITDA by 7–11% owing to a weakening trend in demand.

Prospects

In one year, the stock has corrected by around 10%. We retain our buy recommendation, TP reduced to Rs1,550/share, due to a notable 30- to 35-percent valuation disparity with peers, even in the face of comparable performance and increasing growth prospects in Sri Lanka.