Devyani International should be reduced; aim for Rs 165: MK Global Financial

 Devyani International should be reduced; aim for Rs 165: MK Global Financial

In its research report dated December 18, 2023, Emkay Global Financial suggested downgrading the rating on Devyani International with a target price of Rs 165.

The Devyani International study report from MK Global Financial

Devyani (DIL) has joined the QSR sector in Thailand (KFC). Its subsidiary has purchased a 93% share in Restaurant Development Company (RD), with the remaining 7% being given to a local partner in accordance with regulatory requirements. As. The Indian parent business (Rs 3.4 billion) and Temasek (Rs 3.3 billion) would provide the subsidiary with financial injection to finance the purchase (Rs 6.7 billion). Prices are fair at 9–10 times trailing EBITDA, considering the Thailand business's potential for a low-to-mid teen EBITDA CAGR. In the next ten years, DIL plans to treble the number of stores; throughout this time, we anticipate possible margin increases of 200–300bps and a low–to-mid single-digit SSG profile. We would like to be cautious for the time being, even if further sector acquisitions, a robust rebound in the tourist industry, and improved margin delivery are all possible benefits.

Prospects

As a result of declining demand patterns at KFC India, difficulties in the pizza market, and macroeconomic concerns in Nigeria, we are keeping our DIL Reduce rating at Rs 165.