The performance of Devyani International in the second half of FY25 is expected to mirror the first half due to persistent high food inflation and intense competition in the quick-service restaurant (QSR) segment, analysts say.
A report by Motilal Oswal Financial Services (MOFSL) highlighted that the company is focused on optimising costs to improve restaurant operating margins. However, profitability will remain weak until average daily sales (ADS) improve.
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The ADS for Devyani’s flagship brands, KFC and Pizza Hut, has been declining. KFC’s ADS dropped from ₹117,000 in FY23 to ₹105,000 in FY24 and further to ₹96,000 in Q2FY25. For Pizza Hut, the ADS fell from ₹42,000 in FY23 to ₹37,000 in FY24, with Q2FY25 figures at ₹35,000.
The Gurugram-based QSR operator also has other brands like Costa Coffee and Vaango in its portfolio. In Q2FY25, it added three new brands Tealive, NYF, and Sanook Kitchen.
According to Emkay Research, these new brands “have the potential to lead growth at attractive royalty terms, but we await more clarity on this.” However, HDFC Securities said they were “not too enthused” by the new agreements as they have a long gestation period and may lead to high competition intensity, dragging the profit.
In Q2FY25, Devyani reported a net loss of ₹4.9 crore compared to a net profit of ₹35.8 crore in the same quarter last year. For H1FY25, profits nearly halved to ₹17.5 crore from ₹34.2 crore in the corresponding period of FY24.
Despite this, the company is focussing on store expansion, especially for KFC and its three new brands.
The company acknowledged during an analyst call that these results “reflect continuing cautious consumer spending amidst high inflation in the country.”
“It is prioritising small-format, capital-efficient stores for its newly introduced brands, including Tealive, New York Fries (NYF), and Sanook Kitchen,” Motilal Oswal report stated. For KFC, the company is reducing store sizes from 3,000–3,500 sq ft to 1,600 sq ft to drive cost efficiency.
Analysts believe this strategy could pay off, given that Burger and Chicken remain dominant QSR categories globally. Additionally, the company is innovating with its menu and launching new products tailored for smaller cities.
HDFC Securities projected Devyani’s Ebitda margin for FY25 to be in line with FY24’s 10.8%,
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