Global brokerage Macquarie is strong in the quick service restaurant (QSR) sector and as such has started covering Sapphire Foods and Devyani International. Within the space, the preferred brokerage orders are Devyani International , Westlife Foodworld, Sapphire Foods and Jubilant Foodworks, with Devyani International being the most popular.
Rating and upside potential of QSR stocks as provided by Macquarie
Stock Ratings Target Above
Devyani International Outperform 230 +29%
Westlife Foodworld Top 940 +28%
Sapphire Foods Up 390 +21%
Jubilant Foodworks underperforms 620 -12%
The brokerage holds that compared to Sapphire Foods, the EBITDA or Earnings Before Interest, Tax, Depreciation, and Amortization growth will be higher for Devyani International.
Operating the 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 started listing Devyani International, the stock gained nearly 5 percent from the day’s high. Meanwhile, Sapphire Foods traded down as much as 1.7 percent at Rs 323.05 per share.
Why is Macquarie strong in QSR?
Traders say channel checks show growth in the restaurant industry with demand remaining strong in the December quarter. In the last 3-4 months, the industry is seeing a recovery in demand. KFC and McDonald’s are listed at the top of the Restaurant Brand Index.
Key triggers
The brokerage expects the QSR sector to reap significant benefits from possible tax cuts in the upcoming 2025 budget. The QSR industry is currently facing rising operating costs and input costs and is expecting some relief from GST levy on restaurant services.
Also, Macquarie is forecasting same-store sales growth to come in better than expected. Same-store sales growth is an important metric for retailers that measures how well a retailer’s existing stores are growing in sales.
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