Barbeque Nation Q1 Results Review - Growth Remains Weak; Margin Improving: Motilal Oswal

Motilal Oswal Report

Barbeque Nation Hospitality Ltd. revenue declined 6% YoY, hit by store closures (18 stores closed in FY24 and two in Q1 FY25) and general election-related restrictions. The international business was hurt by the floods in Dubai. Same-store sales growth remained weak, reporting 7.4% YoY decline in Q1 FY25 versus 7.7% decline in Q1 FY24 and 1.4% growth in Q4 FY24. Dine-in revenue and delivery decreased 6% and 3% YoY, respectively.

Gross margin remained strong and expanded 410 bp YoY to 68.1%. ROM improved 200 bp YoY to 13.8%. The cost-control initiatives helped in improving margins, which offset the adverse operating leverage pressure on margin. Ebitda margin improved 220bp+ YoY to 16.6% (estimate 17.0%). The company posted a PBT loss of Rs 55 million.

Management is looking to add 25-30 stores in FY25 and 100 stores over the next three years. BBQ Nation’s current valuations at 19.1 times FY25E and 15.5 times FY26E pre-Ind-AS enterprise value/Ebitda are comfortably positioned. However, we are watchful of its operating margin profile in FY25 amid the challenging demand environment.

We reiterate our 'Neutral' rating on the stock with a target price of Rs 625, based on 15 times June 26E Pre Ind-AS enterprise value/Ebitda.

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