Burger King India (BURGERKI) is one of the youngest and quickest developing players in India’s swift service restaurant (QSR) sector. It is focused on establishing and operating Burger King restaurants across India. The brand is globally well-liked for its signature solution Whopper. BURGERKI provides its services by way of 4 channels — dine-in, takeaway, delivery and drive-thrus. We initiate coverage with a ‘buy’ rating and a target value of Rs 210.
Whopper of an chance, large shift in business enterprise model, aggressive expansion: Initiate coverage with ‘buy’. BURGERKI provides an thrilling investment chance in the Indian QSR space on account of the following elements: The significant Indian meals service market (FSI) is anticipated to provide 9% CAGR more than the coming years, and QSRs are ideal placed to tap this chance. With their higher affordability, aspirational branding, greater comfort, scale advantages, and technological edge, QSRs are anticipated to develop at 19% CAGR more than FY20-25E. Given that the unorganised segment has been severely impacted by Covid-19, QSRs can make additional gains due to their improved hygiene requirements and effectively-positioned alternate channels, in particular delivery.
BURGERKI’s “barbell” solution technique with focus on premiumisation at the top rated finish and worth solutions at the entry-level tends to make it effectively-placed to drive SSSG and margin expansion. The introduction of BK Café from 4QFY22 onwards will considerably elevate its SSSG and gross margin profile as seen in the case of WLDL’s McCafé. BURGERKI has an aggressive target of opening 700 retailers by Dec’26 that will expand its network from the existing 265 retailers, thereby driving its technique sales development greater. We think BURGERKI’s premium multiples are most likely to sustain due to its powerful development profile. Initiate coverage with ‘buy’ rating and target value of Rs 210 (28x Sep’23 EV/EBITDA). Huge chance in FSI for QSRs with established ideal-to-win The Rs 4.2 trillion ($58 billion) Indian FSI is anticipated to develop at ~9% CAGR more than FY20- 25E. Within the FSI, the QSR segment valued at Rs 348 billion ($4.7 billion) has clocked the quickest development but constitutes just 8% of the FSI and 22% of the organized FSI.
QSRs are anticipated to develop at 19% CAGR more than FY20-25E. The benefits for QSRs include things like: a) higher affordability b) globally effectively-recognized and aspirational brands c) distinct cuisines to cater to evolving taste of the youth that have been adapted to Indian tastes d) advantages of scale and improved sourcing e) comfort and swift service and f) technological edge more than peers. Their solutions have higher volume intensity and are amenable to prompt delivery. In the post-Covid world, exactly where 30-40% of restaurants are anticipated to shut down permanently, QSRs are effectively-placed to grab share from other FSI segments as branded players command higher trust.
Valuation and view: We count on all listed Indian QSRs — BURGERKI, WLDL and JUBI — to be substantial beneficiaries of the strengthening tailwinds (led by Covid-19) in favour of QSR players. Among these, JUBI will stay the most lucrative and effective player more than the next handful of years. However, Burger King will appreciate an desirable chance for each topline and margin expansion. This will be led by a large shift in its business enterprise model by way of introduction of barbell solution technique and BK Café. In addition, aggressive shop network expansion and capped royalty price will also be crucial drivers of EPS development. We count on BURGERKI to register sales/EBITDA CAGR of 71%/286% more than FY21- 23E (on a soft base) v/s 32%/38% for JUBI. Over FY21-26E, BURGERKI’s sales/EBITDA CAGR is anticipated to stand at 43%/110%. We think BURGERKI’s premium multiples are most likely to sustain on account of its powerful development profile. Based on a 3-year viewpoint, we arrive at a TP of Rs 365 per share (30% CAGR), assuming 25x a number of.