Stock Tips: The share price of this company has reached twice the issue price in just five months of listing.
Devyani International Outlook: Shares of Devyani International, which runs quick service restaurants (QSR) like KFC, Pizza Hut and Costa Coffee, have doubled over the issue price in just five months. Starting its coverage, brokerage firm CLSA has estimated a rise of 8 per cent in it and has fixed a target price of Rs 207 per share for investment.
Devyani International is the largest franchisee of Yum Brands in India. It has 56 percent of Yum Brands stores. Apart from this, it operates most of the stores of KFC and Pizza Hut in the country. Today (January 18), its shares rose by 3 percent to reach a price of Rs 192. Its issue price was Rs 90 and the shares were listed on 16 August 2021 at a premium of 56.66 per cent i.e. Rs 141.
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Outperform Rating for Devyani International
- According to CLSA, Devyani International’s core brands (KFC, Pizza Hut and Costa Rica) are expected to strengthen further in the medium term on the back of growth in business and increasing number of stores. According to the number of KFC stores, India is ranked 12th, which means that there is a lot of potential to increase its business, which will benefit Devyani International.
- Devyani International’s focus is on smaller and delivery-oriented stores, resulting in 25 per cent capital expenditure (capex) savings from KFC stores and 40 per cent from Pizza Hut stores without any drop in daily sales. According to CLSA, due to the savings in the cost per store, the company has the funds ready for the new store. Apart from lowering the cost, this strategy also boosted the company’s profits.
- According to market experts, Devyani International’s EBITDA growth is likely to quadruple between FY 2021-24 on account of aggressive business expansion, leveraged benefits and improving unit economics of Pizza Hut.
- The brokerage firm estimates that Devyani International can generate cumulative front cash flow of Rs 580 crore between FY 2022-2024, which will help the company to continue its inorganic growth opportunities.
- Due to all this, CLSA started the coverage of Devyani International and gave it an outperform rating. The brokerage firm has set a target price of Rs 207 for investing in this, which is based on 26x FY24CL EV/Ebitda.
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Devyani International has a strong portfolio
Devyani International’s business is primarily in three business verticals which include KFC, Pizza Hut and Costa Coffee with stores in the country. It also operates the international business of KFC, Pizza Hut and other brands in Nepal and Nigeria. The company also does business under its own brand name and carries out other food and beverage operations.
(Article: Kshitij Bhargava)
(The stock recommendations given in the story are from the respective research analyst and brokerage firm. Financial Express Online takes no responsibility for the same. Investments in capital markets are subject to risks. Please consult your advisor before investing.
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