Why did Westlife Foodworld, Devyani and other QSR stocks jump up to 13% today?

Synopsis: QSR stocks surged up to 13% as brokerages flagged early signs of demand recovery, improving same-store sales in January, and better-than-expected EBITDA performance. Positive commentary around stabilising margins, delivery economics, and execution-led strategies triggered a sector-wide rerating despite recovery remaining early and uneven.

The shares of QSR operators surged as positive broker comments indicated the presence of green shoots of revival in the sector. The improving January same-store sales, EBITDA beat due to cost control, and stable delivery economics helped to boost market sentiment. Although analysts indicated that the revival is still in its infancy stages and uneven, a mix of improving trends and confidence in execution helped to generate robust buying interest in the QSR stocks.

Westlife Foodworld Ltd

With the market cap of Rs 8,266 crore, the shares of Westlife Foodworld Ltd have skyrocketed 13% and reached a high at Rs 537.50, compared to the previous day’s closing price at Rs 477. 

The shares of Westlife FoodWorld Ltd jumped by a massive 12% as brokerages turned positive on the outlook post Q3 results, citing early signs of recovery in demand and better-than-expected profitability. The sharp stock movement was a result of positive sentiments about improving January trends, with delivery economics stabilising and sound execution, which helped mitigate concerns about the still-challenging operating environment.

Macquarie pointed out that Q3 EBITDA beat estimates due to lower royalty payouts and pointed out several positives, including positive same-store sales growth in January, with third-party delivery aggregation normalising in Q4, and strong dine-in growth due to value and innovation. Although Macquarie maintained a cautious outlook on extrapolating the lower royalty payout and indicated that January’s recovery may not be sustained, as seen in previous false starts in the QSR space, the overall tone was positive. 

JPMorgan also maintained a positive stance, saying that EBITDA was better than estimates despite in-line revenues and that SSSG improved sequentially, turning positive in January after a muted Q3, with -3.2% SSSG, JPMorgan also took comfort from expansion plans, with the company reaffirming its plans to achieve 580-630 stores by CY27.

Devyani International Ltd

With the market cap of Rs 16,300 crore, the shares of Devyani International Ltd have skyrocketed 10% and reached a high at Rs 135.40, compared to the previous day’s closing price at Rs 123.30. 

Devyani International Ltd’s shares surged by almost 8% as various global brokerages turned positive on the recovery story post Q3 results. Citi was the first to turn positive with a Buy recommendation and a target price of Rs 192, an upside of about 54% from previous day closing price of Rs 123, indicating a strong upside, as revenue growth of 11% YoY and EBITDA beat estimates by 8%, indicating early signs of operating leverage. Citi also noted sequential improvement in KFC same-store sales and management guidance on positive SSSG for all brands in January, indicating early signs of stabilizing consumption trends.

Positive commentary from Goldman Sachs and Bernstein further aided the stock. Goldman maintained a Buy recommendation, citing gross margin beats across formats, EBITDA in India outperforming estimates, and Biryani By Kilo achieving EBITDA breakeven well ahead of guidance, although it warned that it is still early days to call a recovery. Bernstein was more measured in its response, pointing out margin pressures and variability in brands, but did acknowledge 12% YoY consolidated revenue growth, partly driven by acquisitions.

Jubilant Foodworks Ltd

With the market cap of Rs 35,886 crore, the shares of Jubilant Foodworks Ltd have jumped  6% and reached a high at Rs 545.45, compared to the previous day’s closing price at Rs 516.35. The shares are trading at a PE of 119, whereas the industry PE is at 114.

Jubilant FoodWorks Ltd’s shares were up 6% as they moved in line with the overall positive rerating of the QSR sector, with brokerages pointing out the first signs of a demand reversal in the quick service restaurant space. Analysts pointed out sequential trends of improvement in same-store sales, with positive trends in January after low single-digit SSSG declines in Q3, led by improvements in footfalls and value-driven initiatives. 

Brokerages also pointed out EBITDA resilience and stabilisation on account of pricing initiatives, promotions, easing of pressures, and improved delivery economics, although the recovery is still uneven and at an early stage.

In sum, the strong trading in QSR shares represents a sector-wide shift in market sentiment, as brokerages increasingly look to early signs of demand green shoots, positive same-store sales, and a stabilizing margin performance after a prolonged period of slowdown. Although the recovery is still in its infancy and patchy, the positive January trends, cost discipline, and execution-driven strategies have collectively helped to build confidence that the QSR sector is on the cusp of an inflection point.

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on tradebrains.in are their own, and not that of the website or its management. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution while investing or trading in stocks. Trade Brains Technologies Private Limited or the author are not liable for any losses caused as a result of the decision based on this article. Please consult your investment advisor before investing.

The post Why did Westlife Foodworld, Devyani and other QSR stocks jump up to 13% today? appeared first on Trade Brains.