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ICICI Securities
Burger King (Buy)
Target: ₹200
CMP: ₹173.65
Burger King India (BKI) is one of the fastest expanding international QSR chains in India during the first five years of operations (opened about 260 stores) and it plans to open 700 restaurants by December 26. We believe the flexibility around three key business aspects (menu, pricing and supply chain) along-with QSR industry’s expected growth of 23 per cent CAGR over FY20-FY25 are key growth drivers.
We see multiple short-to-medium-term tailwinds: likely sharper revenue recovery (once consumption normalise) given the over-indexation of mall stores, young store maturity provides operating leverage, and addition of BK Café as incremental growth.
Key risks are: BKI may go through a steep learning curve of expansion (and some potential failures) in tier-2/3/4 cities, and potentially higher competitive intensity in north, east India.
Valuation and risks: We model revenue/EBITDA CAGR of 21 per cent/36 per cent over FY20-24. Key downside risks are delays in store expansion plans and increased competitive intensity in north and east markets.
Restaurant Brand International (brand owner of Burger King globally) granting the franchise rights of its Popeye’s brand for Indian subcontinent to Jubilant Foodworks is viewed as a negative for BKI by some investors.
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