Devyani International shares jump 7% after Citi, Bernstein initiates buy rating with huge upside

Synopsis: Devyani International shares jumped 7% after Citi initiated coverage with a Buy and a Rs 192 target, implying 56% upside. Brokerages highlighted improving same-store sales, margin stability, and early operating leverage, though some remain cautious on the pace and breadth of demand recovery.

The shares of this company, which is the largest franchisee of Yum Brands in India and is among the largest operators of chain quick-service restaurants (QSR) in India, had its shares in momentum today after the company received positive target prices from many brokerages with upside of to 56% 

With the market cap of Rs 16,194 crore, the shares of Devyani International Ltd have gained about 7% and reached a high at Rs 132.80, compared to the previous day’s closing price at Rs 123.30.

CITI:

Citi maintains the highest level of optimism with a target price of Rs 192, which translates into a potential upside of 56% from the last close of Rs 123.3. The broking is encouraged by 11% YoY revenue growth, which beat estimates by 2%, and EBITDA growth of 3% YoY, which beat estimates by 8%, indicating early signs of operating leverage in a tough demand environment.

Citi draws comfort from the sequential improvement in KFC same-store sales, which improved to -2.9% in Q3 from -4.2% in Q2, even after accounting for festive shifts. The fact that management indicated positive SSG across all brands in January, including Pizza Hut, further strengthens Citi’s view that consumption trends are stabilising.

The execution story continues to be an integral part of the investment thesis, with sharper promotions, shifts in online-offline strategies, and better delivery economics. Notably, Biryani By Kilo has achieved EBITDA breakeven ahead of schedule, which further strengthens Citi’s view that new formats will help drive a rerating from current levels.

Goldman sachs 

Goldman Sachs prefers to remain positive but holds a wait-and-watch approach with a target price of Rs 160, indicating a potential upside of 30% from the current levels. The broking house highlights positive SSSG in January but holds back on a full recovery until trends are sustained. KFC SSSG was below estimates, but EBITDA was in line, indicating good cost management.

Gross margins surprised positively in all formats, leading to a beat in India EBITDA, despite revenues being in line. Biryani By Kilo’s breakeven ahead of estimates continues to remain a positive trend in Goldman’s view. However, Goldman Sachs would like to see sustained recovery in demand trends before becoming more aggressive.

Bernstein:

However, Bernstein maintains the most conservative stance, pointing out that the company is still on a long road to recovery, despite the fact that the company has registered a 12% YoY growth in consolidated revenues. The broker’s target price of Rs 160, which implies a 30% upside, is moderated by the fact that close to 40% of the growth was driven by acquisition, including Sky Gate.

The broker points out that the company’s core business in India continues to remain weak, with Pizza Hut India continuing to shrink and KFC India registering modest growth. This is a clear indication that the recovery is not yet broad-based.

Margin pressures continue to remain a concern, with the company’s consolidated brand contribution margins declining 40 bps YoY and the India business margins declining 80 bps YoY due to an increase in delivery costs and operating deleverage.

Financials

The revenue from operations for the company stood at Rs 1,441 crores in Q3 FY26 compared to Q3 FY25 revenue of Rs 1,294 crores, up by about 11 per cent YoY. However, the net loss stood at Rs 11 crore in Q3 FY26, up compared to the Rs 8 crore loss in Q3 FY25.

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