IGI Logo

In line results; margin recovery likely to be gradual

* While BARBEQUE’s 2QFY23 results were broadly in line with estimates on sales and EBITDA, the extent of sequential ADS dip over 1QFY23 levels was surprising. Delivery sales declined more than expected and margin recovery trajectory going ahead would be slower than expected earlier.

* Valuations are fair at 16.6x FY24E pre-Ind AS EV/EBITDA. We reiterate our Neutral rating on the stock with a TP of INR1,120 based on 17x Sep’24 EV/EBITDA.

In-line operating performance

* Sales grew 41% YoY and was flat QoQ at INR3,105m (est. INR3,203m) in 2QFY23.

* SSSG stood at 23.4% YoY (est. 39%) in 2QFY23.

* BARBEQUE opened 10 Barbeque Nation (BBQN) stores, leading to 186 stores in India and 6 international stores at the end of 2QFY23. It has 15 extension kitchens for BBQN and 13 Toscano outlets at the end of 2QFY23. The total number of stores in metro and tier-1 cities stood at 148 (v/s 141 stores in 2QFY22) and tier-2/3 accounted for 57 stores (v/s 54 stores in 2QFY22).

* Gross margin grew 50bp YoY and contracted 70bp QoQ to 66.1% (est. 66.0%). EBITDA grew 41.1% YoY to INR583m (est. 604m). EBITDA margin came in at 18.8% v/s 18.7% YoY and 22.4% QoQ (est. 18.9%) in 2QFY23.

* Adj. PAT grew 39.2% YoY to INR43m v/s 31m YoY (est. 25m) in the quarter.

* Exceptional gain on INR32.6m pertains to:

* INR34m gain from liquidated damages received from lessors relating to outlets closed.

* INR14.8m gain (net) from termination of lease with respect to the above number of outlets as per IND AS 116.

* INR16.2m loss from the write off of leasehold improvement, pertaining to above outlets vacated.

Highlights from the management commentary

* Dine in business grew 61%, driven by increased volume and value growth. The management is witnessing a trend similar to that of the last quarter in terms of covers and this may increase going ahead with employees returning to the office space in IT companies. At the per outlet basis, the dine-in business is at pre-covid levels.

* Expansion -The management maintains it guidance of adding 40 stores in FY23. ~33-35 BBQ stores will be added in India, ~1-2 BBQ in international markets and ~3-5 Tascano stores. Currently, there are 16 restaurants under construction.

* Margins – The management is seeing some moderation in input cost inflation. Gross margin is expected to improve marginally in 2HFY23. EBITDA margin was positively impacted by healthy salience of new restaurants

* At the company level, 3Q ADS is generally 12-15% higher than that in 2Q. On a per store basis, it would be ~10% higher.

Valuation and view

* Changes to our model led to a marginal dip of ~4% each in our FY23/FY24 EBITDA forecasts.

* We reiterate our Neutral rating on fair valuations, inherently lower return ratios as compared to QSRs, and its potential vulnerability of its higher ticket size delivery business in an inflationary environment.

To Read Complete Report & Disclaimer Click Here

For More Motilal Oswal Securities Ltd Disclaimer http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html SEBI Registration number is INH000000412

Above views are of the author and not of the website kindly read disclaimer