Q3FY24 Review: Devyani International: Bad quarter dragged by Pizza hut and Nigeria

5 Feb 2024 , 11:55 AM

Devyani International (Devyani) reported revenue growth of 6.6% over the year-ago quarter (3.9% below IIFL’s estimates) despite Q3 being a festive quarter as consumer sentiment remained subdued. Pre-Ind AS EBITDA margins declined 550 basis points over the year-ago quarter, impacted by lower brand contribution and higher corporate overheads (Nigerian currency devaluation). QSR companies like Jubilant, Westlife have also reported weak Q3. Jubilant reported a Like-for-Like decline of 2.9%, estimated SSSG of (5.2%), better compared to the 12.6% decline reported by Pizza Hut (PH), which has been the trend in the recent quarters. Clearly, KFC seems to be the focus considering the increased competitive intensity in the Pizza space, which would drive growth in the medium term. Devyani has completed acquisition of 274 KFC stores in Thailand as of January 2024.

Analysts at IIFL Capital Services have cut their adjusted EBITDA by 9-10% to factor in weak Q3. While demand slowdown in the near term is likely a concern for discretionary names, analysts at IIFL Capital Services believe a recovery should follow going ahead, maybe more gradual, which reflects in their 30% adjusted EBITDA CAGR over FY24-26.