Devyani International Ltd: Rewiring for better growth & margin; Sapphire merger on track

研报英文原文证据摘录

Devyani International Ltd: Rewiring for better growth & margin; Sapphire merger on track

improved 140 bps to 16.9% (due to higher GM). Further margin upside is

contingent on ADS returning to ~Rs 105–110k levels which could drive 20%+

margins, per the management. It expects that this could take 1.5-2 years

assuming ~5–6% SSSG, subject to macro cyclicality. To support this (and

better utilize store capacity), marketing spend is being reallocated to encourage

dine-in visits (instead of deep discounting in lower-margin off-premise

channels), showing early results- with on-premise salience improving ~300

bps y/y to 57% (59–60% target). Various global KFC initiatives are in the

pipeline for India launch - 1) KWENCH beverage platform, 2) Sauces lineup,

and 3) Boneless offerings - with KWENCH (product optimization/capex

planning ~done) slated to be tested first.

• PH - sequential improvement, but losses persist.SSSG was at -2.2% y/y (vs

-3.7% in Q4) and it closed 13 stores. ROM remained in loss (-1.9%) on higher

costs/operating deleverage despite better gross margin. Management

attributed the persistent weakness in PH largely to the low ADS due to the

existing three-way structure that has slowed decision-making and innovation-

but expects this to be corrected post the merger (once approved). It opines that

the brand requires differentiated innovation and correct price laddering across

all price points, which will be executed post the merger completion (likely in

FY28).

• International - Consistently strong. Revenue rose 21% y/y with ROM

improving 150 bps y/y to 18.2% aided by operating leverage. Management is

pleased with Thailand's trajectory on both revenue and profitability and would

be keen to consider further territory expansion should an opportunity arise,