Buy Devyani International; target of Rs 160: Emkay Global Financial

What happened

Emkay Global Financial kept a Buy rating on Devyani International with a target price of Rs 160. Devyani's second-quarter EBITDA beat Emkay's estimate by about 10%, helped by Costa, own brands and international business, while KFC EBITDA was 5% lower on raw material inflation.

Confirmed

Global impact / market context

A 10% profit beat shows Devyani is earning more per sale than expected, even as KFC faces higher ingredient costs. If the improving growth continues and the Sapphire merger completes, the broker expects the stock to be valued higher, which matters to shareholders.

Analyst inference

The stock has been held back by a long consumer slowdown and a slow merger timeline with Sapphire. The report argues these drags are easing: KFC same-store sales grew 4.4%, store additions rose to 70 in the quarter, and BBK turned profitable.

Analyst inference

What to watch

1. Devyani reiterated guidance to open about 110 KFC stores and 200-220 total stores in FY27, so watch whether store openings stay on that pace. Confirmed
2. Watch whether KFC's planned second-half improvement arrives through value meals like the Rs99 and Rs149 offers and buy-one-get-one bucket deals. Proposed
3. Watch the Sapphire merger timeline and raw material inflation, since a faster deal with cost savings would support the Rs160 target, while prolonged delays or higher costs would not. Analyst inference

Evidence

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