Global brokerage Macquarie is bullish on the quick service restaurant (QSR) sector and consequently has initiated coverage on Sapphire Foods and Devyani International. Within the space, the brokerage's order of preference is Devyani International , Westlife Foodworld, Sapphire Foods and Jubilant Foodworks, with the most likability for Devyani International.

Rating and upside potential for QSR stocks as given by Macquarie

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Stock                                  Rating               Target                    Upside
Devyani International    Outperform        230                          +29%
Westlife Foodworld       Outperform        940                           +28%
Sapphire Foods               Outperform        390                        +21%
Jubilant Foodworks     Underperform     620                           -12%

The brokerage held that in comparison to Sapphire Foods, EBITDA or Earnings Before Interest, Taxes, Depreciation, and Amortization growth will be higher for Devyani International. 

Operating QSR chains, the company operates franchisees of Yum Brands, KFC, Pizza Hut, TWG Tea and Costa Coffee. The company is also engaged in providing services under its brand name Vaango.

After the brokerage initiated coverage on Devyani International, the stock gained nearly 5 per cent at the day's high. Meanwhile, Sapphire Foods traded with a cut of as much as 1.7 per cent at Rs 323.05 per share.

Why Macquarie is bullish on QSR?

The brokerage said that channel checks indicate growth in the restaurant industry with demand remaining strong during the December quarter. For the past 3-4 quarters, the industry is witnessing a recovery in demand. KFC and McDonald's are included in top proprietary Restaurant Brand Index.

Key triggers

The brokerage expects the QSR sector to draw huge benefits from the likely tax cuts in the upcoming budget 2025. The QSR industry is currently facing inflating operational as well as input costs and is expecting some relief on the GST being charged for dining services.

Also, Macquarie forecasts same-store sales growth to come in better-than-expected. The same-store sales growth is an important metric in retail that measures how much a retailer's existing stores grow in sales.

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