Devyani International Shares Jump The Most In Three Weeks As Jefferies Initiates Coverage With A 'Buy'
Shares of Devyani International Ltd. rose as much as 8.70%, the biggest intraday gain since Nov. 12, after Jefferies initiated coverage on the largest franchisee of Yum Brands in India with a 'buy' call.
The track record of the company is changing for the better, with aggressive addition of new stores and better unit economics aiding market share growth, Jefferies said in a note.
Devyani International operates 800-plus restaurants as of September 2021 (KFC: 309; Pizza Hut: 351). The company also operates 45 Costa Coffee outlets.
Jefferies said the acceleration in the shift from unorganised to organised players in the food-services industry is a catalyst for market share gains for Devyani International. It expects the store count to rise at an annualised rate of 24% till fiscal 2023-24.
The company's efforts to rework its operations by shifting to smaller, new stores and cost cuts are key triggers for growth, according to Jefferies.
While KFC continued to remain the best performer for Devyani International, Pizza Hut has also witnessed a positive turnaround aided by a series of initiatives, such as increasing brand presence, new launches and better store economics, the note said. However, Costa Coffee is expected to see its share fall as its revenue contribution remained weak at less than 5%, the brokerage said.
Jefferies expects Devyani International's revenue and Ebitda to grow at an annualised rate of 25% till FY24, ahead of its peers like Jubilant FoodWorks Ltd. and Westlife Development Ltd.
Resurgence in Covid-19 cases, an increase in competition and execution remained key near-term risks for the company, Jefferies said.
Shares of Devyani International rose to Rs 149.4 apiece after Jefferies initiated coverage and closed 6.5% higher at Rs 148.15 apiece. The brokerage has set the price target at Rs 185, an implied return of 33.05%.
The stock ended 5.4% lower on Monday. It has risen 17.39% in November so far compared to a 3.51% decline in the NSE Nifty 50 index.
Of the four analysts tracking the company, three maintain 'buy' and one suggests 'sell'. The overall consensus price tracked by Bloomberg implies a potential upside of 5.9%.