Motilal Oswal Recommends Buying This Stock For 55% Return, In 1 Year

Brokerage firm Motilal Oswal has recently recommended buying the stock of Restaurant Brands Asia (RBA) for a 55% return in the near term. The firm mentioned, "Covid-19 has augmented the business opportunities for QSRs resulting in an optimistic outlook for all branded QSR players. Both delivery and takeaway channels were in focus over the last two years as the consumers developed new habits of food consumption."

Target Price

The Current Market Price (CMP) of Restaurant Brands Asia is Rs. 97. Motilal Oswal has estimated a Target Price for the stock at Rs. 150. The stock is expected to offer a 55% upside, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 97
Target Price	Rs. 150
1 year return	55.00%

Company performance

RBA posted a decent recovery in 3QFY22 with ADS at Rs. 114k, surpassing the FY20 level of ~Rs. 110k. RBA's Indonesia business is likely to deliver ~39% sales CAGR over CY21-23E on: a) post-Covid recovery, b) store additions, and c) expected addition of BK Café. RBA introduced the first BK Café in India in 3QFY22, ahead of its earlier guidance of 4Q. It had 18 BK Cafés by end of the quarter, on track to achieve the guidance of 75 BK Cafés by Mar'23. Simultaneously, its EBITDA margin is likely to improve to ~20% in FY24E from ~12% (post-IFRS 16) pre-Covid.

Comments by Motilal Oswal

Motilal Oswal commented, "RBA is tracking well on post-Covid recovery with its Average Daily Sales per store (ADS) in 3QFY22 (of Rs. 114k) surpassing the FY20 level (of Rs. 110k), driven by the upbeat festive season and elevated delivery channel sales. With ~50-55% of its stores being within malls and metros, the dine-in business is currently lagging in recovery but can rebound sharply as and when full mobility returns. The revival in dine-in business should also support its margins."

About the company

Restaurant Brands Asia has a chain of restaurants; that prepare and distribute ready-to-eat food items like burgers, fries, and beverages. BKI has a target to add 330 stores by CY26 from 176 stores as of Jun'21. The CAPEX is likely to be funded through equity and internal accruals. RBA acquired 83.24% stake in PT Sari Burger Indonesia (Burger King Indonesia) from QSR Indoburger (66.48%) and PT Mitra Adiperkasa (16.76%). It also infused USD40m in Burger King Indonesia (BKI), thereby raising its stake to 88.61%.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. 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.