Motilal Oswal has given Buy recommendation for Sapphire Foods recommended buy rating on the stock with a target price of Rs 1420 in its researc with a target price of Rs. 1420 in its research report issued on May 24, 2022

Motilal Oswal’s research report on Sapphire Foods

SAPPHIRE offers an exciting investment opportunity in the Indian Quick Service Restaurant (QSR) space on account of the following factors: The Indian Food Service Industry (FSI) is expected to clock 9% CAGR in the coming years, with QSRs likely to grow faster at 23% CAGR over FY20-25. SAPPHIRE’s new scalable Restaurant economic model is a game-changer. Its omnichannel strategy and reduction in store sizes, along with other elements of the model, have led to a big shift in SAPPHIRE’s unit economics. KFC India’s business is on a strong footing, with a healthy ADS and profitability. We expect it to register 31% sales CAGR over FY22-24E driven by rapid store additions and strong SSSG aided by a smart recovery post-Covid. PH’s India business is seeing a turnaround, with a higher focus on delivery, while retaining its dine-in edge. We expect it to register 35% sales CAGR over FY22-24E with a resultant improvement in its Restaurant EBITDA margin. Overall, SAPPHIRE is poised to deliver strong growth with 29%/43% sales/EBITDA (pre-Ind AS 116) CAGR over FY22-24E. SAPPHIRE’s valuations are at a considerable discount to peers.


We initiate coverage with a Buy rating and TP of INR1,420 per share (27x/17x FY24E EV/EBITDA for KFC/PH) which is at a significant discount to the target multiples for DEVYANI’s KFC/PH at 45x/35x.

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