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Home / Markets / Mark To Market /  Burger King posts strong Q3,  but  consistency  is vital
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Burger King India Ltd’s performance in the December quarter (Q3FY22) is encouraging. Average daily sale (ADS) recovery in Q3 stood at 104% of full-year FY20 ADS. This was driven by continued growth in the delivery business while the dine-in segment put up a muted show. As such, delivery ADS recovery is 160% of FY20 levels vis-à-vis 78% for dine-in.

“As per management, restrictions on malls as well as lower traction on stores near Metro stations in the north has kept the dine-in recovery a little subdued," pointed out analysts from JM Financial Institutional Securities Ltd in a 25 January report. “This was also evident in its regional growth," the analysts said. Note that region-wise Q3 ADS recovery versus FY20 level for north stood at 95%, west 119% and 108% for both south and east.

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Expansion mode

Overall, Burger King’s ebitda, or earnings before interest, taxes, depreciation and amortization, rose by 28% sequentially to 32.8 crore. Q3 ebitda margin expanded to 11.7%, a 130 basis points (bps) increase over Q2. One basis point is 0.01%. However, higher depreciation and finance costs meant the company incurred a Q3 net loss of 15 crore.

Meanwhile, network expansion accelerated during the quarter with the net addition of 20 new stores. This increased the total store count to 294 at Q3-end. The company plans to grow this figure to 320 stores by March-end. Burger King has nine restaurants under construction and 65 more in the pipeline.

Post Q3 results, Burger King’s shares were flat, although the stock has lost about 30% of its value from the 52-week highs seen in August on the NSE. On Tuesday, the stock closed at 133.10, marginally lower than 135 it closed on its listing day on 14 December 2020. The issue price during the initial share sale was 60.

Going ahead, the pace of sales improvement will be a key factor to monitor. It helps that recovery in December was higher versus Q3FY22 at 111% of FY20 ADS.

The revival in the dine-in segment also needs to be watched and so would be the margin trajectory.

“With the acquisition of BK Indonesia, also now approved by shareholders, sustaining historical growth rates and steady margin improvement here would also remain the other key monitorables," the JM Financial analysts said.

On the brighter side, BK Café outlets (18 opened in Q3) offer incremental growth opportunities. Even so, increase in the overall competitive intensity remains a key risk in general.

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