Here's why Citi prefers Devyani International over Jubilant Foodworks
Citi expects DIL to clock a 30 percent revenue CAGR over the financial year 2023-2025 period.
Citi has initiated coverage on Devyani International and assigned a ‘Buy’ rating with a target price of Rs 232 per share, which is around 38 percent upside to the current trading price.
The global brokerage expects Devyani International's decision to exit loss-making formats and improve average daily sales to drive its business.
Devyani International Ltd. (DIL) is the largest franchisee of Yum Brands in India and is among the largest operators of quick-service restaurant chains in the country. The company operates KFC, Pizza Hut, TWG Tea, and Costa Coffee restaurants in India. It is also a franchisee of KFC and Pizza Hut in Nigeria and Nepal.
Citi expects DIL to clock a 30 percent revenue CAGR over the financial year 2023-2025 period. The profit-before-tax margins are expected to improve by 550 basis points during this period. Cumulative free cash generation is seen at Rs 450 crore.
DIL is expected to report a profit after tax of Rs 400 crore in the financial year 2025.
Citi has also preferred Devyani to Jubilant Foodworks Ltd. given better near-term growth prospects.
Jubilant Foodworks is the master franchise for Domino's Pizza in India, Nepal, Sri Lanka, and Bangladesh.
Citi noted that while Devyani trades at 44X of 25 PE ratio against Jubilant Foodworks at 39X, the premium is justified due to higher revenue growth and ROE expectations.
Devyani reported a consolidated income of Rs 751.94 crore in the September quarter. It posted a profit after tax of Rs 56.83 crore for the September quarter.
Shares of Devyani ended 2.16 percent lower at Rs 167.70 on the BSE on Monday.
(Edited by : Rukmani Krishna)
First Published: Jan 9, 2023 4:57 PM IST
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