Devyani International - Thai Foray To Add Source Of Incremental Revenue: KRChoksey

KRChoksey Research Report

The acquisition of Restaurants Development Co., Ltd. and its holding companies will add a source of incremental revenue for Devyani International Ltd.

The transaction valuation of 0.9 times enterprise value/sales seems reasonable considering ~8.0 times enterprise value/ FY23 sales for Devyani International.

The gross and brand contribution margins of RD are lower compared to the levels Devyani International operates, at a consolidated level as well as at Devyani- KFC brand level.

We await management commentary about their plans for the growth and profitability trajectory of the acquired business going ahead.

We retain our estimates for now and will revise our estimates post the Q3 FY24 results or as we get more details of the transaction from the company.

We estimate revenue/ Ebitda to grow at 22.5%/ 21.9% compound annual growth rate for FY23-FY25E. The stock is currently trading at 33.6 times/ 25.8 times enterprise value/Ebitda multiple for FY24E/ FY25E, respectively.

We apply an EV/Ebitda multiple of 30 times to arrive at a target price of Rs 230 per share (unchanged), with an upside potential of 19.3% from the current market price.

Accordingly, we maintain our 'Buy' rating on the shares of Devyani International.

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