Analysts expect the fast food chain to report its first profit for fiscal year 23 alone. They have targets in a wide range of Rs 160-210 in stock. Those hoping for delays in store expansion plans and increased competitive intensity in northern and eastern markets have suggested lower targets, while those hoping for a quick reopening of shopping centers, the introduction of an inexpensive menu and the company’s entry into the coffee segment have set higher price targets. Targets suggest up to 27 percent potential upside over Tuesday’s close of Rs 165.50 each.
The Quick Service Restaurant (QSR), 55 percent of whose stores are in shopping malls, reported a reduction in losses in the June quarter, to Rs 44.35 million from a loss of Rs 80.45 million. rupees in the quarter of the previous year. Sales soared 289 percent year-on-year (yoy) to 149.7 crore. Gross margins stood at 65.2% during the quarter, an increase of 290 basis points year-on-year, but a decrease of 40 basis points sequentially.
The QSR said that the recovery in sales was 76 percent at the end of the June quarter, compared to the March quarter, as business was substantially affected due to the second wave. Even as food at home gradually returned to normal levels over the past two months, the recovery in delivery remained above 170 percent, the company said, adding that the average daily sales recovery (ADS) in August it has been greater than 95 percent. compared to fiscal year 2020 level.
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JM Financial said Burger King India’s quarterly results were quite similar to Westlife Development (which runs MCDonald’s), with a 23.6% sequential decline in revenue per store versus Westlife’s 26.6%. While revenues were positively surprising, other expenses were much higher than expected. This led to disappointment on the margin front, JM Financial said.
“The company’s guidance on consistent same-store sales growth, relative to fiscal 2020 levels, appears to suggest mid-teens growth in fiscal 22 second year and would also provide more clarity on the inherent margin improvement it has achieved. For now, we hold, given the valuable valuation. But the success of the Café format, which is not yet integrated into our estimates, and the launch of new stores could propel upward from current levels “he said, suggesting a target of 160 rupees on the action.
Scrip, which hit a record 219.15 rupees in December last year, hit levels below 130 rupees in April, before recovering to levels of 180-190 rupees. It has lost its mojo ever since.
Economic menu to help growth
Analysts said Burger King’s recovery lagged behind that of
and Westlife, which have a relatively greater relevance of convenience channels and a diversified portfolio of stores.
But Motilal Oswal Securities said that since states have allowed mall and dining operations, Burger King would see a significant improvement in performance.
Burger King recently launched an inexpensive menu, the Stunner, which is off to a good start, the brokerage said, adding that expanding the value platform and elevating the entry point could significantly help Burger King’s performance. This brokerage has a target of Rs 210 in shares.
“The Burger King brand has all the ingredients to establish itself in the Indian QSR market in the long term, if it executes its strategy well. It is not yet profitable and we expect it to report earnings for fiscal 23. At current market price, it is trading at 36 , 6 times the Ebitda for fiscal year 22 and 24 times the Ebitda for fiscal year 23. We maintain our cumulative rating, “he said, revising his target to 165 rupees from 155 rupees.
The coffee segment will be launched soon
Burger King has announced its entry into the coffee segment, similar to McDonald’s McCafe, and is targeting a soft launch for the December quarter. The company is looking for 75 coffees by March 2023. Management said the coffee formats could help drive an increase in visits during breakfast and between lunch and dinner. “As seen with Westlife Development, the introduction of in-store coffee drives growth in same-store sales and improves the overall economy of the store,” said Edelweiss Securities. “Our implicit value addition to BKI’s coffee factoring target price comes in at Rs 40, where we project accumulation to FY35E.” The brokerage has a target of Rs 201 on the shares.
ICICI Securities sees many benefits for Burger King, including a likely steeper revenue recovery due to the reopening of shopping centers, operating leverage due to the maturity of young stores, and the addition of BK Café, leading to incremental growth. . While suggesting a target of Rs 200, the brokerage said Burger King may experience a steep learning curve, and also some potential failures, in Tier 2, 3 and -4 cities. He also said that the company could see increased competitive intensity in North and East India.