Devyani International stock slides over 4% after Q4 results; should you buy, sell or hold?

KFC, Pizza Hut, and Costa Coffee operator Devyani International's share price slipped over 3.8 per cent on Wednesday's trading session. The stock closed at ₹150.85 per share on May 15, versus the previous close of ₹156.90 on Tuesday.

The stock's decline was triggered by the company's announcement of a net loss of ₹49 crore for the March quarter of the financial year FY24. 

In the corresponding quarter of the previous year, the company had recorded a profit of ₹60 crore, whereas in the December quarter of FY24, the company's profit amounted to ₹5 crore.

Also read: Devyani International Q4 result: Company reports a loss of ₹49 crore; adds 47 stores in the fourth quarter

Revenue from operations for the assessed quarter reached ₹1,047.1 crores, a 38.7 per cent increase compared to the revenue of ₹755 crore in Q4FY23. This growth was bolstered by the acquisition in Thailand and additional store openings. Sequentially, the company's consolidated revenue expanded by 24.2 per cent, with Q3FY24 revenue standing at ₹843.1 crores.

In FY24, the company announced opening 256 net new stores spanning various brands and geographic locations.

"Over the course of the year, we opened 256 new stores, including 47 in the fourth quarter. As of March 31, our total store count has reached 1,782, including the 283 KFC stores, we acquired in Thailand on January 18, 2024," said Ravi Jaipuria, Non-Executive Chairman, Devyani International.

Should you buy, sell or hold?

Brokerage firm Elara Securities maintains its ‘buy’ rating on the stock with a lower target price of ₹190 per share.

Also read: Devyani's domestic struggles continue as it integrates Thai acquisition

“DEVYANI KFC is trading at 33x one-year forward EV/EBITDA (pre-IndAS). This could be at a premium versus other categories, which could lead to a target EV EBITDA of 39x (unchanged). The stock has corrected 14% in the past six months. Maintain Buy with June 2025E SoTP-TP pared to INR 190 (from INR 210), as we cut pre-IndAS EBITDA margin for KFC. We maintain our preference for the fried chicken category because of stable profitability in an uncertain demand environment. We foresee the category to have strong growth Q2FY25 onwards, led by better offtake and a low base, last year,” the firm said in a note.