Broking firm, Motilal Oswal has a buy call on the stock of Burger King India and sees a potential upside of 25% on the shares from current levels.
|Current market price||Rs 168|
|Target price Rs||Rs 210|
Strong financial performance
According to Motilal Oswal. despite dine-in restrictions due to the second COVID wave, Burger King India delivered a strong 1QFY22 performance, led by the delivery channel. The recovery trends in Jul-Aug’21 continue to remain encouraging, the brokerage has noted.
“As states allow operations at Malls (55% of the stores are in Malls) and dine-in, Burger King India will see significant improvement in its performance. Its recently launched Stunner menu has also gotten off to a good start. With the widening of the value platform and elevation of the entry point, the Stunner menu is expected to significantly aid Burger King India’s performance,” the brokerage has said. According to it, with the widening of the value platform and elevation of the entry point, the Stunner menu is expected to significantly aid Burger King’s performance. “We continue to remain bullish on Burger King India as the the Stunner menu enhances the value platform, while being gross margin accretive. The introduction of BK Café is expected to boost SSSG and margin.
Apart from this the strong network expansion, won’t materially impact ADS, and its royalty rate is capped at 5% till CY39, while offering visibility on margin expansion. Also, the company has reduced its rental expenses. We maintain our Buy rating with a target price of Rs 210 per share (28x Sep’23E EV/EBITDA),” the brokerage has said.
Burger King India clocked a 130% quarter on quarter with sales growth in own app orders and over 1 million app downloads in 1QFY22. Its goal is to have one-third of delivery orders from the BK app. Burger King India is likely to open a few cafés in 3Q (for test marketing) v/s 4QFY22 guided earlier. It has mapped 75-100 restaurants for adding BK Cafés. All new outlets will have a BK Café. All this should boost the performance of the company in the coming quarters, which makes the shares of Burger King India an interesting stock to buy at the current levels.
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