Buy This Food And Beverages Stock For 17%, In Near Term: Emkay Global

Emkay Global, a reputed brokerage firm suggested investors to buy the stocks of Devyani International (DIL) for a 17.60% return. "The company's growth momentum continues; margins surprise positively", says the firm.

Target Price

The Current Market Price (CMP) of Devyani International (DIL) is Rs. 179. Emkay Global has estimated a Target Price for the stock at Rs. 210. The stock is expected to offer a 17.60% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 179
Target Price	Rs. 210
1 year return	17.60%

Company performance

Q3 performance was strong but largely in line. EBITDA grew 67% on a low base, led by 33% store count growth, 24% growth in rev/store, and a 40bps margin improvement. Core brands, KFC/PH, saw ~64% rev growth on ~40% store count growth and a low ADS base. PH/KFC revenues grew ~64% on a low base, led by ~40% growth in store count and ~24% SSG. While the base was low, ADS also improved sequentially by 7%/4% for KFC/PH, driven by better operating conditions, price hikes in KFC, and strong traction in menu innovations in PH. DIL expects 200-250 annual additions beyond FY22, aided by a correction in-store metrics.

Comments by Emkay Global

Maintaining buy status, Emkay Global said, "With the turnaround in profitability, DIL has earned the right to grow faster than in the past. DIL should deliver an industry-leading EBITDA CAGR of ~37% over FY22-25E, led by a 21% store count CAGR, 7% SSG, and gradual margin gains. The margin improvement was led by price hikes in KFC, a better mix in favor of high-margin on-premise sales and operating leverage. Going ahead, DIL expects PH format and operating leverage to drive gradual margin gains. We maintain our Buy rating on DIL."

About the company

Devyani International (DIL) is the largest franchisee of Yum Brands in India and is among the largest operators of chain quick-service restaurants in India, on a non-exclusive basis, and operates 655 stores across 155 cities in India, as of March 31, 2021. They are a franchisee for the Costa Coffee brand and stores in India. They are subsequently continuing to expand their operations with both KFC and Pizza Hut franchises. DIL's healthy store additions continued, with 75/81 additions in Core brands/overall. DIL is now targeting the upper band of FY22 guided additions of 200-250, with 192 additions in 9M.

(Also read: Buy This Stock For 17%, In 1 Year: Emkay Global Given Buy Rating)

Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.