Restaurant Brands Q3 Results Review - Weak Consumer Sentiments Ruling Value For Money Demand: Centrum Broking

Centrum Broking Report

Restaurant Brands Asia Ltd.'s Q3 FY24 print was below our expectations; standalone revenue/Ebitda grew by 20.5%/47.9% while profit profit after tax loss cut to Rs 64 million. With 441 stores same-store sales growth of 2.6% indicates continued weakness in consumer sentiments.

With 334 Burger King cafe covering 76% store its average daily sales stood flat at Rs 119000 (-5.5% QoQ). Management alluded sharp focus on building traffic using value for money layer through menu innovation (Rs 99/- meal) yielding good results. Restaurant Brands Asia said it is building price leadership and value credentials for Gen-Z and Millennials remains key priority.

Geopolitical issues impacted Indonesia revenues to Rs 1.6 billion with average daily sales at Rs 17.8 million (-1%) YoY, though Restaurant Brands Asia aims to strengthen operation with 163 Burger King and 25 Popeyes stores establishing relevant chicken menu and leadership in Burgers.

Gross margin inched up to 67.1% (plus 76 basis points), yet higher employee/other expenses at plus 10.4%/+17.8% resulting in post-IND AS Ebitda margins at 15.9% (plus 294 bp).

Restaurant Brands Asia cuts SSSG guidance to 3% with ~67% gross margin in FY24.

We tweak margin assumptions and maintain Reduce rating with a revised discounted cash flow -based target price Rs 112 (implying enterprise value/Ebitda of 14.1 times average FY25E/FY26E).

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