Prabhudas Lilladher has given Buy recommendation for Burger King India with a target price of Rs. 250 in its research report issued on May 27, 2021
Prabhudas Lilladher’s research report on Burger King India
We are increasing our DCF based target price to Rs250 (Rs221 earlier) as we factor in 1) BK Café launch by Jan-22 (75 cafés by FY23) and 2) superior margin delivery and upgraded guidance 3) success of BK App (200% growth) and 4) sustained innovations with launch of stunner Menu at price point of Rs50 and Rs70. We believe that 1Q would be impacted as Burger king as 55% stores in malls and another 15% in transit locations (Metros, IT parks etc.), however situation is far better than 1Q20 given building traction with convenience channel. Burger chains as a whole will emerge stronger from the Pandemic given 1) Closure of more than 25-30% eateries due to Pandemic 2) Increased consumer focus towards health and hygiene measures and 3) Low penetration. Burger king has huge competitive advantage to capitalize on emerging growth opportunities given 1) Target to open 320 stores by FY22 and 700 by CY26 (265 as on FY21), 2) Launch of Value proposition strategy, 3) fixed royalty at 5% 4) cluster based approach with faster scalability and operating leverage 5) Launch of BK café by end of FY22. We estimate CAGR of 34.5% in sales over FY21-23.
We estimate PAT breakeven by FY23 and strong profit growth post FY24. We believe margin guidance can see upside if BK café is a success. Maintain Buy with DCF based target price of Rs250 (Rs221 earlier).