Thursday, February 29, 2024
Manpower of India
HomeInvestmentBroker’s call: Sapphire Foods (Buy)

Broker’s call: Sapphire Foods (Buy)

Target: ₹1,570

CMP: ₹1,393.95

The India QSR opportunity remains extremely attractive & offers faster growth in the consumption space. The key factor is the execution on critical aspects – portfolio, price-value equation, omni-channel presence and unit economics. In this report, we highlight Sapphire’s improved performance on key metrics over larger time frame (FY19-23), rather than looking at quarterly picture.

In KFC, despite presence in low non-veg consumption states, store count CAGR has been healthy and SSSG/ADS CAGR over FY19-23 is higher compared to Devyani, which provides assurance on opportunity in its territory. In PH, while it doesn’t have rights for delivery stores, the CAGR for store count and SSSG/ADS CAGR is not materially different vs Devyani.

Another key highlight is the delivery on profitability which has been much better, visible from substantial reduction in gap in restaurant operating margins (ROM) vs Devyani over last five years for both the formats. In fact in FY23, despite inflation, Sapphire has seen expansion in adj ROM for both KFC/PH vs compression in Devyani.

With execution remaining strong, we believe there is headroom for discount to Devyani (35 per cent ) to narrow over time



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