Although experts see that the case affects the profitability of the monopoly concession YUM! brands (in India and Sri Lanka) in the short term, they find solace in the fact that stocks are trading at significant discounts to their peers and believe that the prevailing valuation is fully negative. Some analysts’ targets point to a 37-72 percent potential compensation on the table.
Sapphire Foods operated 95 Pizza Hut stores in Sri Lanka on March 31, as well as 263 KFC and 219 Pizza Hut stores in India. It also has operations in the Maldives, which account for only 1 percent of its total sales.
has started discussing the stock with a target of 1,420 rupees, which indicates a 44 percent possible increase. The brokerage has allocated FY24 EV / Ebitda a multiple of 27 times to a KFC company due to its robust metrics, including average daily sales (ADS) and brand margin, and 17 times to PH trades.
This stockbroker said the shares were trading at significant discounts compared to target multiples for Devyani’s KFC (45 times) and Pizza Hut (35 times) due to the disadvantages Sapphire faces in terms of trading. They include KFC territorial rights in countries with more vegetarian populations. Devyani can also enter the Sapphire Foods area with PHD-format stores, which require lower investment.
“While the increase in discounts is justified in light of the above reasons, the growth potential is attractive enough to justify investment events,” he said.
Pizza Hut is the largest QSR chain in Sri Lanka. In a performance call, Sapphire suggested that Sri Lanka’s macroeconomic problems started nine months ago but have worsened over the past 30-45 days. Sapphire, however, said it had benefited, as the unorganized channel has had a much greater impact and also because of the superior delivery capacity, as it makes 90 per cent of delivery through its own fleet.
At FY22, Sri Lanka returned business, Sapphire said, performing best from the start, with 25 new restaurants added, same-store sales up 42 percent, revenue growth 60 percent and Ebitda for restaurants 23.2 percent, a 360-point increase
The company said it was not facing a 15-hour power outage in Sri Lanka, as reported by the media, but only a 2-3-hour shutdown. It also said that it has accumulated major raw materials such as cheese, which it is also getting from India,
The company expects the macroeconomic situation to stabilize over the next six months, noting that a sharp double-digit increase in sales in the same fixed-currency store also continued in this quarter in March. The bulk of the devaluation in Sri Lanka will come from the first quarter onwards, the company said.
IIFL Securities said that the share price has corrected significantly and builds up all the negative. It has kept buying shares with a target of Rs 1,350.
“The impact of a 40 percent devaluation should be mitigated in part by good underlying growth, plans to expand stores for FY23 are on track. We believe there will be some reduction in FY23. That said, we believe the situation is still the same. “When a country faces such significant economic challenges, it is unlikely that an arbitrary party will escape without at least some minor bruises.”
said in a May 18 commentary while proposing a target of Rs 1,700 on equities from Rs 1,800 previously, with a 4-8 per cent hit on its Ebitda plan for Sri Lanka in FY23-24.
At Wednesday’s price of 986.85 Rs, the bond is down 36 percent from the high of 1,535 Rs on February 14th. The price target of up to Rs 1,700 on shares indicates up to 72 percent of a possible boom on the table.
Sapphire reported a PAT consolidation of Rs 26.5 million for the March quarter, compared to a loss of Rs 13.7 million in the same quarter. Sales increased by 46 percent in the quarter to 494.30 million rupees compared to 316.20 million in the same quarter last year. Ebitda’s margin increased to 21 percent from 18.4 percent between years.
(Disclaimer: The opinions, suggestions, opinions and opinions of the experts are their own. This does not represent the views of the Economic Times)
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