Accumulate Restaurant Brands Asia Ltd for the Target Rs 112 by Prabhudas Liladhar Ltd
India business on a roll, Indonesia remains a drag
RBA delivered a healthy all-round performance with SSSG of 14%, driven by a strong value proposition and healthy in-store traffic. ADS stood at Rs131k, while sales/store grew 9% for second quarter consecutively, reflecting continued improvement in store economics. The company turned Adj. PAT positive led by operating leverage and higher other income. Corporate overheads also declined by ~3.8% sequentially on strict cost control. Indonesia business continued to weigh on consol profitability with EBITDA loss of Rs119mn. While the Burger King brand maintained its recovery trajectory, Popeyes continued to remain a drag
We observed a shift in the company’s stance on Indonesia, from a potential sellout to a focused revamp of existing stores, with the pace of improvement remaining a key monitorable. RBA’s India strategy remains on track, driven by
1) Value-led combos (2 veg burgers at Rs79, chicken at Rs99 and café at Rs99)
2) Traffic growth through menu innovation and various programs (kids program to be launched in Dec
3) Utility cost reduction
4) Gradual improvement in café ADS.
Near-term outlook remains healthy, with operating leverage, tighter cost controls and higher other income (Rs836/1,678mn in FY27/28, driven by capital infusion) expected to support EPS of Rs1.6 by FY28. However, Indonesia will continue to weigh on consolidated performance, with a turnaround remaining elusive. Retain Accumulate with SOTP-based TP of Rs112 (Rs101 earlier).
India SSG at 14%, ADS flat QoQ:
Revenues grew by 24.1% YoY to Rs7.1bn (PLe: Rs7.1bn). Gross margins expanded by 205bps YoY to 70.4% (Ple: 70.6%). EBITDA grew by 42.3% YoY to Rs1104.2mn (PLe: Rs1111mn); Margins expanded by 200bps YoY to 15.6% (PLe:15.6%). Adj PAT grew by 177.1% YoY to Rs155.9mn (PLe:Rs91mn) driven by higher other income. SSSG came at robust 14.0% for 2Q (Ple: 13.5%). Sales/store grew by 9% YoY to 11.8mn. BK Indonesia Revenues grew by 3.3% YoY to Rs1.4bn. Gross margins expanded by 24bps YoY to 57.1%. EBITDA loss reduced by 30% YoY to Rs119mn; Adj Loss reduced by 11% YoY to Rs376mn
Please refer disclaimer at Report
SEBI Registration number is INH000000933
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