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Robust SSSG at India operations

Restaurant Brands Asia (RBA IN) Q2 EBITDA was ahead of our estimate by 15.2%, led by India same store sales growth ( SSSG ) of 14.0% YoY, all traffic -led and ahead of Westlife Foodworld’s (WESTLIFE IN , Accumulate, CMP: IN R 599 ; TP: INR 625) 10.1%. India pre -IndAS EBITDA margin rose 282bp YoY to 7.8%, above WESTLIFE’s 7.1%, despite a 47bp QoQ dip in gross margin on chicken inflation. Indonesia restaurant EBITDA remains positive, but Popeyes remains loss -making. We raise our FY27 -29E EBITDA in the range of 4-7%. We increase our TP to INR 100 , as we roll forward to December 2028E . Given the stock has run up ~30% since Q1 results , we revise to Accumulate.

India – SSSG visibility improves: BK India revenue rose 24.1% YoY to INR 7.1bn on SSSG of 14.0% (12.6% in Q1), all from traffic with a flat average check. Drivers were the peri -peri range, which sold ~30% more than the South Korean range in Q1, app -only 2 -for-INR 79-99 value deals (app frequency up 7% YoY) and a 14th straight quarter of dine -in traffic growth. Management sa ys Q3 has started well; a children’s meal and an Avengers co-branded range launch in Q3. We expect SSSG of 12.5% in FY27E and ~5% pa during FY28 -29E . RBA added 17 stores to 607. We expect ~77 net additions a year, an 11.8% store CAGR to 811 during FY26 -29E.

Indonesia – value reset lifts margin: Revenue (BK + Popeyes ) grew 3.3% YoY to INR 1.4bn. Restaurant EBITDA margin (pre -IndAS) rose 525bp YoY to 0.6%, as occupancy and other cost fell 399bp to 30.6% of sales on rent & utility savings and employee cost fell 130bp. Burger King earned INR 44mn (3.5% margin), while Popeyes lost INR 36mn; RBA is in talks with the brand owner on Popeyes , including a stake sale . The strategy is value -led: Super Hemat, launched in late September, has added 35 -40 transactions per store per day, backed by Boss Whopper premium launches, kiosks and asset upgrade funded by up to IDR 250bn (~INR 1.3bn).

Margin – no price hike; efficiency absorbs inflation: India gross margin fell 47bp QoQ to 70.4% on a spike in chicken prices, which management sees as temporary. RBA has under taken no meaningful price rise, with average check flat , and expects industry pricing of 4 -5% a year. Management sa ys cost inflation is in Q2 P&L; utility savings from new broilers and solar fully offset it, and wage hikes are built into the annual plan. Restaurant EBITDA margin (pre -IndAS) rose 249bp YoY to 12.9%; standalone PAT turned positive at INR 156mn. Management expects restaurant margin to be > 13%, moving to 15% on volume leverage .

Revise to Accumulate with a higher TP of INR 100: RBA has delivered robust SSSG for the second quarter in a row ; hence, we raise our revenue and EBITDA in the range of 4-7% during FY27 -29E. However, the stock has rallied ~30% since Q1 results, pricing in SSSG performance ; this along with structural margin performance at Indonesia operations remain an overhang , given Popeyes ’ underperformance; thus , we revise to Accumulate from Buy. We increase our TP to INR 100 (from INR 90) as we roll forward to December 2028E. We value our India operations at 24x pre -IndAS EV/EBITDA . Currently, we assign no value to Indonesia. An exit from Popeyes , (under talk s), is key re -rating trigger. Key Risks are weaker SSSG and inflation.

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