Buy Burger King India Ltd For Target Rs.252 - Ventura Securities
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BK Cafes and Store Expansions to stir growth
Burger King India Ltd is a QSR company which came into being on November 11th 2013. The brand has an international presence across 100 countries with more than 18,500 outlets. It is held by QSR Asia Holdings which has a 94% stake in the company. In India they currently have 261 restaurants operating in 6 clusters within the country and are winning consumers by tailoring their offerings, pricings and promotions according to Indian tastes and preferences.
There is strong growth visibility on the cards as the company plans to roll out 700 stores by FY26 from its current count of 270 stores. Q4FY22 is also going to witness the launch of BK Cafes and the count is expected to reach 75 by FY23. We expect the total store count to reach 447 by FY24. Revenues are expected to grow at a CAGR of 55.5% to INR 1,861 cr by FY24 driven by a 19% CAGR in number of outlets, improving footfalls and strong SSSG.
The company is also in the process of acquiring an 85% stake in Burger King Indonesia which is valued at 12 times FY23 EV/EBITDA. 85% of the business is valued at USD 131.8 mn and BK India plans to further invest USD 40 mn which is going to be used to grow the number of outlets from the current 175 to 360 stores over the next 5 years. The share issue expenses are expected to touch USD 8 mn and USD 10 mn will be used in the expansion of BK cafes in India. The company plans to raise a total of USD 190 mn for these purposes, either through a preferential issue or a QIP. The company is expecting to operate about 1,100 stores in India and Indonesia combined with a revenue potential of INR 7,000 cr by FY27.
At the CMP of Rs. 163, Burger King is valued at 2.9X FY24 EV/Sales basis. This compares very favourably with the valuation of Jubilant FoodWorks (5.7X FY24 EV/Sales), Devyani International (4.2X FY24 EV/Sales) and Westlife Development (3.5X FY24 EV/Sales). We initiate coverage on Burger King India with a price objective of INR 251.6 (5.0X FY24 EV/Sales) representing a 54.1% upside potential in the next 18-24 months.
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