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Dolat Capital Report
Devyani International Ltd.'s organic revenue was in line with our estimate. The company reported 49.1% revenue growth including Thailand acquisition (ex-Thailand up 7.3% YoY) and led by revenue growth of 6.8/0.4/41.6/36.17% across KFC/ Pizza Hut/ Costa Coffee/ Vaango.
The company added 85 stores in Q2 FY25 taking the total count to 1,921 (incuding Thailand) and aspires to open 100-110/60-70 new KFC/PH stores in CY25E.
It is on track to achieve ~ 2,000 total stores by the end of FY25E. Further, the company signed Master Franchise Agreements for three new brands in Q2FY25 - Tealive, New York Fries and Sanook Kitchen.
Devyani's operating performance was below our estimate, due to lower operating leverage. Though base for Pizza Hut and KFC would become favorable in the ensuing quarters, overall slowdown is expected to drag profitability down.
We have reduced our FY25/26E Ebitda estimates by 5.8/4.5% to factor in Q2 performance and downgraded our rating to ‘SellL' valuing at 18x (30% premium to Sapphire) FY27E EV/Ebitda with revised target price of Rs 160 (Rs 187 earlier).
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