Buy Devyani International; target of Rs 160: Emkay Global Financial

Moneycontrol • 1 day ago

Original source

Key Investment Pillars

  • Devyani International's (DIL) emerging formats such as Costa, BBK, and international business are driving growth, offsetting raw material-related margin pains in KFC.
  • The company's initiatives to strengthen customer recruitment through value propositions like Rs99 and Rs149 meal combos, Wednesday value proposition, and targeted BOGO offers are aiding transaction growth in KFC.
  • Similar initiatives are planned for Pizza Hut over the next few quarters.
  • Biryani by Kilo's brand contribution margin has improved to near double-digit levels, with a target of 14-15% in the short-to-medium term, supported by procurement initiatives, improved labor deployment, and store-level and supervisory efficiencies.
  • The company remains on track to meet its full-year guidance of opening 200-220 net new stores.

Thesis Validation Checklist

  • Investors should watch for further improvement in same-store sales growth (SSSG) for KFC, driven by the management's strategic focus on reviving the on-premise channel.
  • The success of similar transaction-led initiatives at Pizza Hut will be crucial.
  • Biryani by Kilo's ability to achieve its target brand contribution margin will be an important signal.
  • The company's ability to maintain its growth profile and potential merger synergies with SAPPHIRE will drive significant rerating.