Restaurant Brands Asia share price surges 6% as Q3 loss narrows: Should you buy or sell now?
- Restaurant Brands Asia's share price jumped 6% after reporting a narrower Q3FY24 loss and robust sales over the festive period. Despite challenges in demand, Restaurant Brands Asia's Q3FY24 performance surprised favourably, with a 20% YoY increase in revenue and 6% improvement in traffic.
Restaurant Brands Asia share price jumped 6% on Tuesday's session after the company reported a narrower third-quarter (Q3FY24) loss, which had been supported by robust sales over the festive period. In comparison to the same period last year, the company's consolidated net loss shrank to ₹36.18 crore from ₹50.42 crore.
Restaurant Brands Asia share price opened at ₹117.15 apiece on BSE. Restaurant Brands Asia shares touched an intraday high at ₹121.15 and a low of ₹115.70.
According to Rajesh Bhosale, Equity Technical and Derivative Analyst, Angel One, this counter has seen volatile moves since the last couple of weeks, after correcting sharply from last week's highs of ₹133.
“We are seeing a bounce back in the counter in today's session; however, the price structure still isn't appealing, and we may see selling pressure in the event of any further bounce back. In such a scenario, ₹122–124 is resistance, whereas ₹112 is support,” said Bhosale.
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Despite challenges in demand, brokerage house Antique Stock Broking stated in its research that Restaurant Brands Asia's 3QFY24 performance surprised them favourably, particularly in terms of profitability. India's 20%/2.6 year-on-year (YoY) increase in revenue and same-store sales growth (SSSG) was primarily driven by 6% improvement in traffic.
Because of the rapid store expansion, average daily sales (ADS) decreased slightly (by ₹119k) from the previous year. Notably, the company changed its SSSG estimates for India business from 6% to 3% in light of the current downturn in demand. In the future, the management intends to concentrate on increasing profitability and traffic-led revenue growth (by expanding BK Café and developing innovative menus), which should lead to better performance.
"Post 3QFY24 results and factoring profitability improvement, we have increased our EBITDA estimates by 7%/ 3%/ 4% for FY24/ FY25/ FY26. Over the long term, we expect strong performance from RBA on a) Aggressive store expansion, b) Margin expansion driven by menu innovation, expansion of BK Café, and operating leverage, and c) Improvement in Indonesia business.
We value the Indonesia business and India business at 10x and 15x EV/EBITDA multiple on FY26E estimates. We maintain BUY recommendation with a revised target price of ₹150 (previously ₹146) based on SoTP-based valuation," said Antique in its report.
Restaurant Brands Asia's excellent margin accretion in the India business—up 300bp YoY—was the report's main highlight, according to brokerage Nuvama Institutional Equities. SSSG remained steady at 2.6% (estimate: 3%), despite the sector's general decline. The SSSG guidance for FY24 was revised down to 3% from 6% before, while FY25 remained at 8%. With topline growth of about 1%, Indonesia's performance remained subpar. The recovery process has been taking longer than expected.
“While our India EBITDA sees a marginal upgrade, consolidated EBITDA for FY24 sees a 7% cut due to the muted performance in Indonesia. Rolling over to 9MFY26 yields a TP of INR137 (unchanged) valuing the India/Indonesia business at 18x/8x EV/EBITDA (post Ind AS). Maintain ‘BUY’,” the brokerage said.
Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.
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