homemarket NewsShares of Pizza Hut franchise owner ready to surge after 2 year flat trend, says Kotak Institutional
Shares of Pizza Hut franchise owner ready to surge after 2-year flat trend, says Kotak Institutional
According to Kotak Institutional, Pizza Hut and KFC, both operated by Sapphire Foods, are performing exceptionally well and are on par with their industry counterpart, Devyani International. Their analysis suggests that Sapphire Foods presents a compelling growth narrative, offering reasonable valuation, especially considering the soaring valuations seen in the Quick Service Restaurant (QSR) sector over the past few years.
Sapphire Foods India presents a compelling growth narrative with reasonable valuations, especially considering the soaring valuations seen in the Quick Service Restaurant (QSR) sector over the past few years, Kotak Institutional Equities said in a report.
Sapphire Foods India is the company that operates KFC and Pizza Hut in India.
Kotak assigned a "buy" rating to the stock and raised its target price from Rs 1,615 to 1,700 per share. The brokerage said Pizza Hut and KFC are performing exceptionally well and are on par with their industry counterpart, Devyani International.
Sapphire Foods stands as the second-fastest-growing player in the Indian QSR market, driven by an extensive network expansion and consistently robust same-store sales growth, particularly within KFC.
However, despite its promising fundamentals, the stock has faced a period of underperformance spanning 18 to 20 months.
Some of this underperformance can be attributed to a continuous influx of supply from various sources, including investors looking to divest their holdings not only within the QSR sector but also across the broader market.
Kotak's analysis estimates a 19% EBITDA (earnings before interest, tax, depreciation, and amortisation) growth over the coming years.
Sapphire Foods' stock is currently trading at 23 times its EBITDA for FY25, a notable contrast to Devyani, which commands a valuation of 40 times its EBITDA, the report stated.
Others in the sector are also trading at valuations exceeding 30 times, underscoring Sapphire Foods' attractive near-35% discount to its industry peers.
Sapphire Foods stock ended the day over 2% higher at Rs 1,436 a piece.
(Edited by : Shweta Mungre)
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