Many brokerages are bullish on the shares of Devyani International and believe that the stock may rally further as the company is aggressively expanding its store network. Devyani International is the second-largest QSR chain (Quick Service Restaurant) in India that operates brands like KFC, Pizza Hut and Costa Coffee, after Jubilant FoodWorks which operates Domino’s Pizza, Dunkin’ Donuts, and Popeyes.
Devyani International’s Pizza Hut is on the verge of a turnaround and KFC already enjoys strong brand equity. In the last month, the company’s stock prices have tumbled by 12.60% to ₹155.00 levels. However, it has zoomed by 25.59% in the last year.
Angel One- Target ₹ 219 per share
As per a research report by Angel Broking published on March 8, 2022, the QSR industry is expected to grow by ~23% CAGR over FY20-25, and this could benefit the company. They expect it to add 200 stores per annum, for three to four years, and this would drive strong revenue growth. They expect the company to report strong top-line growth, as it would have a lower capital expenditure and improve store-level economics that would boost the operating margin going ahead.
The brokerage has given a target of ₹ 219 per share, with an upside of 45% as of 8th March 2022. Currently, the share is trading at ₹ 155 apiece.
Motilal Oswal- Target ₹ 216 per share
“While strong demand tailwinds in 3QFY22 boosted KFC’s ADS, the same may normalize going forward. However, the gradual uptick in ADS for Pizza Hut is likely to continue on account of the brand’s focus on the delivery channel,” according to a Motilal Oswal report published in mid-February, this year.
“We remain bullish on DEVYANI’s prospects due to: a) KFC’s strong brand equity, b) turnaround in PH, led by the focus on delivery, c) sharp network expansion across the portfolio, d) healthy mid-teen operating profitability,” it added.
The brokerage has retained a ‘buy’ rating on the stock, with a target price of ₹ 216 per share, as of February 16, 2022.
Emkay Global- Target ₹ 210 per share
“After years of sub-par and volatile return ratios, DIL’s RoIC is likely to surge to c.20% in FY22E, thanks to the remodelling of store formats. While store sizes have reduced, the average daily sales (ADS) have not. We model RoIC of 40% by FY25E. We initiate on DIL with a Buy rating and a Mar’23E TP of Rs 210, based on 42x FY24E EV/EBITDA, derived from a two-stage growth model. A slower pace of execution is a key downside risk to our forecasts,” according to a report by Emkay Global which is bullish on the stock.
It has given a target price of ₹ 210 on the share with a ‘buy’ rating, as of February 16, 2022.
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