Burger King Shares May Be Overvalued Compared To Domino’s, McDonald’s

Burger King Shares, which got listed at 108 per cent premium maybe overvalued when compared to the franchisees for McDonald's and Domino's Pizza.

Jubilant Foodworks owns the master franchise rights for Domino's Pizza, while Westlife Development Limited's wholly owned subsidiary Hardcastle Restaurants Pvt. Ltd. (HRPL) holds the master franchise for McDonald's in western India and South India.

"At the current market price of Rs 125, BKIL is valued at 5.7x FY20 Price/sales and 17.3x FY20 P/BV which fully captures its strong brand positioning, robust store expansion plans and the bright growth prospects of the QSR industry in India. However given its weak financials, the valuation seems a little stretched vs players like Jubilant Food and Westlife Development," Motilal Oswal has said in its latest report.

Burger King India Ltd (BKIL) is one of the fastest growing international QSR chains in India got positive response on its IPO (oversubscribed 157 times). Today it got strong listing at Rs. 115 vs the issue price of Rs. 60.

BKIL enjoys exclusive National Master Franchisee Rights in India till Dec 31, 2039, with an obligation to develop and open atleast 700 restaurants by Dec 31, 2026. The royalty rate is favourable with capping at 5% of sales.

"It is one of the fastest growing QSR chain India with 268 restaurants spread across 17 states/UTs and 57 cities. It has already garnered 5% market share in India's INR348billion QSR market.

Over FY18-20, BKIL's Revenue/EBITDA grew at a CAGR of 49%/258% led by 2x the store strength. However, it continues to make losses at PAT level. The same store sales growth stood at 12.2%/29.2% in FY18/FY19 while it surprisingly became flat in FY20. In 1HFY21, revenue declined 68% YoY, while it made losses at EBITDA and PAT levels due to the Covid-19 impact," Motilal Oswal Financial Services has stated in a report.