Devyani International Q4 Results Review - Discouraging Margin Performance: Dolat Capital

Dolat Capital Report

Devyani International Ltd.’s organic revenue was in-line with our estimate. The company reported 38.7% revenue growth including Thailand acquisition (excluding Thailand up 8.6% YoY) led by 11.3/36.3/16.5% increase across KFC/Costa Coffee/ Vaango.

However, Pizza Hut revenue de-grew by 4.5%. KFC brand contribution expanded 150 basis points to 19% while, Pizza Hut brand contribution contracted 480 bps to 4.4% on YoY basis.

Devyani International added 47 stores in Q4 FY24 taking the total count to 1,782 (inc. acquisition). The company maintained similar guidance of 275-300 stores in India. However, it remains cautious on Pizza Hut store addition.

We believe that overall profitability will remain under pressure in the near term given-

1. increased competition from new and existing players on Pizza Hut and

2. pressures mounting on KFC business.

We reduce our FY25/26E Ebitda estimates by 7.7/9.8% to factor in Q4 performance and subdued demand. Valuing the stock at 20 times FY26E enterprise value/Ebitda, we have arrived at a target price of Rs 151. Maintain ‘Sell’ rating.

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