Devyani International forays into Thailand QSR market; CLSA maintains 'Outperform' rating on stock

Devyani International shares: Devyani International Limited (DIL), one of the leading quick service restaurant (QSR) chain operators in the country and the largest franchisee for Yum Brands (KFC & Pizza Hut) in India, announced on Monday, December 18, its foray into Thailand QSR market through a strategic partnership. The company said it will acquire 274 KFC restaurants in Thailand.

Reacting to the development, shares of the company jumped as much as 7.79 per cent to Rs 197.45 apiece on the BSE in the opening trade on Tuesday. The stock ended 5.16 per cent higher at Rs 192.75.

In its exchange filing, the company, which is also the sole franchisee for the Costa Coffee Brand and stores in India, said that Devyani International DMCC (‘DID’), Dubai, a subsidiary of Devyani International Limited (‘DIL’), has announced its entry into the Thailand market by signing a Share Purchase Agreement and other transaction-related documents to acquire a controlling interest in Restaurants Development Co., Ltd. (‘RD’) Thailand, through the acquisition of an equity stake in RD and its holding companies, to enter the Quick Service Restaurants (‘QSR’)/Limited-Service Restaurants (‘LSR’) market in Thailand.

This strategic venture into Thailand is a collaboration between Devyani International Limited and Temasek Holdings (Private) Limited, a global investment company headquartered in Singapore with over SGD 380 billion in assets under management.

RD operates a chain of 274 (as of September 2023) KFC restaurants across Thailand and employs more than 4,500 people. Closing is expected to occur on or before March 31, 2024, and is subject to all customary regulatory and other approvals, as may be required for the transaction, the filing added.

KFC in Thailand is franchised by Yum Restaurants International (Thailand) Co., Ltd, the subsidiary of Yum Brands, Inc. KFC is the largest QSR/ LSR chain in Thailand and has enjoyed enormous growth and success since the first restaurant opened in 1984.

"Thailand is a strong poultry market in its basket of meat consumption, and we believe there is an opportunity for the market to grow even further," Devyani International said. 

What do brokerages suggest?

Foreign brokerage CLSA has maintained an 'outperform' rating on the stock and has set the target price at Rs 211, translating to a 15 per cent rise from the closing level of Rs 183.30 on the BSE on Monday. The brokerage notes that the total purchase includes local bank debt of Rs 3.85 billion and is valued at a TTM EV/Sales of 0.83 times.

TTM stands for trailing 12 months.

Jefferies, on the other hand, has maintained a 'Hold' rating on the stock with a target price of Rs 190.

Shares of the company were listed on the bourses on August 16, 2021. The IPO of the company was a bumper hit. The issue was overall subscribed 116.70 times. It was subscribed 39.48 times in the retail category, 95.27 times in QIB, and 213.06 times in the NII category by August 6, 2021 (Day 3 of the bidding).