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SSSG remains strong; operating leverage kicks in

* United Foodbrands (UFBL) reported another strong quarter, with consolidated revenue growing 43% YoY to INR4.3b (beat), led by 28.7% SSSG (est. 16%, 14.4% in 4QFY26). Revenue growth was volume-led as the company refrained from price hikes. Dine-in revenue increased 40% YoY (+63.5% volume), while delivery revenue grew 62% YoY. BBQ India’s revenue rose 43% YoY to INR3.3b, driven by 33.5% SSSG and 68.6% dine-in transaction growth. BBQ India added three stores during the quarter, taking the network to 210 stores.

* BBQ International’s revenue increased 46% YoY to INR385m, supported by 8.5% SSSG, while Premium CDR revenue grew 36% YoY to INR587m, supported by 13.6% SSSG. The company added one international restaurant, while the Premium CDR portfolio remained at 42 stores. Management reiterated its target of reaching 300 restaurants by FY27-end, while increasing the long-term opportunity for the BBQ brand to 600 restaurants (vs. earlier 400-450).

* GM contracted 200bp YoY to 64.1% for BBQ India due to continued value investments, while RoM (Pre-Ind AS) expanded 490bp YoY to 14.5% on strong operating leverage. RoM expanded 117% YoY.

* Consolidated GM contracted 190bp YoY to 65.8%, primarily due to valueled investments in India and commodity inflation in international markets. However, Pre-Ind AS EBITDA margin expanded 350bp YoY to 8.1%, supported by operating leverage. Reported EBITDA increased 52% YoY to INR699m, with EBITDA margin expanding 90bp YoY to 16.4% despite continued investments to drive transaction growth.

* Management remains focused on driving volume-led growth, with no price hikes planned. Margins are expected to improve gradually through operating leverage and procurement efficiencies. While the strong 1Q performance demonstrates the success of its structural initiatives, 2HFY27 is expected to witness SSSG moderation due to a higher base. We believe sustaining robust volume growth while simultaneously delivering meaningful margin expansion will remain challenging, particularly amid continued investments in value offerings and store expansion. We model EBITDA Pre-Ind AS margin of 7.6% for FY27 and 8.2% for FY28. Given volatile execution in the past, we reiterate our Neutral rating with a TP of INR775.

Highlights from the management commentary

* Management cautioned that reported SSSG will likely neutralize or moderate as the year progresses. This will be due to high base, rather than a dip in actual demand.

* It expects its GM to expand directionally from its current levels over time.

* There are 15 restaurants currently under construction, which are scheduled to operationalize during 2Q and 3Q in FY27. The company remains on track to cross 300 restaurants by FY27.

* Management increased its long-term outlook for the Barbeque Nation India brand specifically, estimating a potential for 600 restaurants (up from the previous guidance of 450) due to the success of the ‘Big Buffet’ format in smaller markets.

* The company has guided for a total FY27 capex of INR1.4b, with INR1.2b allocated to new store expansion and INR0.2b to maintenance and refurbishments.

Valuation and view

* We raise our EBITDA estimates by ~4% for FY27 and FY28 on better delivery of revenue in 1QFY27.

* Management remains focused on driving volume-led growth, with no price hikes planned. Margins are expected to improve gradually through operating leverage and procurement efficiencies. While the strong 1Q performance demonstrates the success of its structural initiatives, 2HFY27 is likely to witness SSSG moderation due to a higher base. We believe sustaining robust volume growth while simultaneously delivering meaningful margin expansion will remain challenging, particularly amid continued investments in value offerings and store expansion. We model EBITDA Pre-Ind AS margin of 7.6% for FY27 and 8.2% for FY28. Given volatile execution in the past, we reiterate our Neutral rating with a TP of INR775 (20x Mar’28E Pre-Ind AS EV/EBITDA).

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