KFC, operator of Pizza Hut, Devyani International, plunges 7%; What should investors do?

Devyani International share price today: Shares of Devyani International (DIL) fell 7% to Rs 182.50 on BSE in intraday trading on Tuesday. This comes after he saw a huge block deal change hands. According to a Bloomberg report, about 26.4 million shares, or 2.33% of the company’s capital, changed hands. As of 9:30 a.m., the stock was trading at Rs 182.50 on the BSE, down 7% from its previous close.

As of June 30, 2022, the promoters held a 62.80% stake in DIL. Among public shareholders, Dunearn Investments (Mauritius) Pte Ltd held 98 million shares or 8.13% stake in the company, according to shareholding structure data.

CNBC TV-18 had reported that Dunearn Investments (Mauritius) Pte Ltd is likely to sell a nearly 3% stake at Rs 182-196.25 per share. The base offering was expected at 2.6 crore shares (2.19% equity) with an option to increase to 87.76 lakh shares (0.73% equity). The total deal size is estimated at $80-86 million.

Dunearn Investments currently holds a 16.26% stake in Devyani International.

After today’s correction, the stock is down 15% from its all-time high of Rs 215 hit on August 18, 2022. Over the past month, the stock has outperformed the market gaining 12%, against a rise 4% Sensex. Over the past year, it has risen 57%, compared to a 6% gain for the benchmark.

DIL is the largest franchisee of Yum Brands in India and is among the largest QSR chain operators in India on a non-exclusive basis. It operates 1,008 stores in over 215 cities in India, Nigeria and Nepal as of June 30, 2022. Additionally, DIL is franchised for the Costa Coffee brand and stores in India. It made its stock market debut last August. The company has issued shares at a price of Rs 90 per share.

finance

The quick service restaurant (QSR) operator reported a net profit of Rs 74.76 crore for the first quarter ended June 30, 2022. Its operating revenue in the quarter under review nearly doubled to Rs 704 .72 crore, down from Rs 352.75 crore. in the period a year ago, he added.

DIL’s total expenditure during the quarter increased by 69.08% to Rs 636.58 crore, compared to Rs 376.49 crore during the corresponding period a year ago.

During the quarter, DIL opened 25 new restaurants for KFC, bringing the total number to 391. While for Pizza Hut, it added 34 stores, bringing the total number to 436 stores.

Commenting on the results, President Ravi Jaipuria said DIL’s pan-India reach has further expanded and is now present in 215 cities. “The contribution of non-metro stores within our core brands has increased to 52% now. Our total number of system stores stood at 1,008 stores as of June 30, 2022,” he said.

Should you invest?

Brokerage Motilal Oswal, in its report released earlier this month, said: “DEVYANI’s 1QFY23 result was operationally consistent. Despite cost inflation, overall gross margin was down only 10 basis points year-on-year and 20 basis points quarter-on-quarter due to timely price increases. These increases have been well absorbed, as our April 22 channel verification update highlights. For KFC, average daily sales (ADS), at 127,000, topped 3QFY22 levels, with healthy measures of profitability, given high chicken cost inflation. While Pizza Hut continues to report sequential improvement in brand contribution margin, ADS is still below our estimate. With an increasing emphasis on hygiene, convenience and innovation, QSRs, with their strong brands, present an excellent investment case, given their low penetration rate in India. Strong pricing power helps to combat inflation in input costs. DEVYANI remains among our top picks in this space. We maintain our buy rating.

“We maintain our buy rating with a SoTP-based TP of INR 225 per share (Jun’24E EV/EBITDA of 45x/35x for KFC/Pizza Hut on a pre-Ind AS basis),” he said. added.

Ravi Singh, VP and Head of Research-ShareIndia, said: “Devyani International’s share is in a major downtrend amid the huge block deal and the selloff may continue at around 170 levels. . Investors should avoid this stock in the current scenario and wait for a trend reversal. However, DIL has delivered encouraging performance in the past and is committed to maintaining the growth figures in the future.

“Devyani International fell 7% after seeing a huge block trade. However, details of the buyers and sellers of the deal were not known until 9.30am. The stock was trading at Rs 182.50 on the BSE, down 7% from its previous close. It has lost about 14% recently. Investors can expect some price action as the close below Rs 181 may trigger further selling, the action could consolidate in a range. In this case, a target of Rs 163 can be expected. Investors are advised not to take large long positions with such transactions,” said Manoj Dalmia, Founder and Director of Proficient Equities Limited.

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