Devyani International share price jumps nearly 8% on Thailand market entry

Devyani International share price jumped almost 8 per cent in early trade on the BSE on Tuesday, December 19, a day after the company announced its entry into the quick service restaurants (QSR) and the limited service restaurants (LSR) market in Thailand.

Devyani International share price opened at ₹190.10 against the previous close of ₹183.30 and soon jumped 7.7 per cent to the level of ₹197.45.

In an exchange filing on December 18, the company said its subsidiary Devyani International DMCC, Dubai, entered into the Thailand market by signing a share purchase agreement to acquire a controlling interest in Restaurants Development Co. Ltd. Thailand, through the acquisition of an equity stake in Restaurants Development and its holding companies, to enter the QSR and LSR market in Thailand.

According to the exchange filing, Restaurants Development operates a chain of 274 (as of September 2023) KFC restaurants across Thailand and employs more than 4,500 people.

This strategic venture into Thailand is a collaboration between Devyani International Limited and Temasek Holdings (Private) Limited, a global investment company headquartered in Singapore, with over SGD 380 billion in assets under management.

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Devyani International share price has been lacklustre this year so far. Year-to-date, the stock has gained just about a per cent. Devyani International share price hit its 52-week high of ₹227.75 on September 11, 2023, and its 52-week low of ₹134.05 on March 27, 2023.

Brokerage firm Emkay Global Financial Services pointed out that Devyani has entered the Thailand QSR market with its subsidiary acquiring a 93 per cent stake in Restaurant Development Co. (RD) and the remaining 7 per cent stake being allocated to a local partner, as per regulation norms.

The brokerage firm said the valuations are fair at 9-10 times its trailing EBITDA, given the potential of low-to-mid teens EBITDA CAGR for Thailand business.

"Devyani expects a doubling of store count in 10 years, and we see a scope of low-to-mid-single-digit SSG profile and potential margin gains of 200-300bps over this period. While the further acquisition of territories, stronger recovery in the tourism space, and better margin delivery remain potential upsides, we would like to remain conservative as of now," said Emkay.

"Given muted demand trends in KFC India, challenges in the pizza category, and macroeconomic issues in Nigeria, we maintain our ‘reduce’ rating on the stock with a target price of ₹165," said Emkay.

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