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Devyani International Limited post robust Q2 Results; became net-debt free | Q2FY22 Result Analysis & Earnings Call Highlights

Devyani International Limited post robust Q2 Results; became net-debt free | Q2FY22 Result Analysis & Earnings Call Highlights

Published on 10 November 2021 Views 97 Comments 1

Devyani International Limited (DIL) is the largest franchisee of Yum Brands in India and is among the largest operators of chain quick-service restaurants (QSR) in India. The company has announced its Quarterly Results for Q2FY22 on Monday 1st November 2021. The company has posted phenomenal results as the company has turned profitable after witnessing losses in the past quarters along with it, the company has also become met net-debt free. To know more about the Q2 performances of the company and the earnings call highlights of Devyani International Limited, do read this article.

1) Q2FY22 Result

Devyani International- Q2FY22 Results

Devyani International- Q2FY22 Results

  • The Consolidated Total Revenue from Operations of the company has shown growth of 124.4% YoY from Rs. 230 Cr. in Q2FY21 to Rs. 516 Cr. in Q2FY22. Quarter-on-Quarter the revenue from operations has increased by 46.3% from Rs. 353 Cr. in the Q1FY22.
  • The Earnings before Interest, Taxes, Depreciation & Amortisation (EBITDA) of the company have also grown by 435.3% YoY to Rs. 128 Cr, in the Q2FY22 from Rs. 24 Cr. in Q2FY21. Sequentially, the EBITDA of the company has increased by 125.2% from Rs. 57 Cr. in Q1FY22.
  • The EBITDA margin stood at 24.8% in the quarter ended 30th September 2021 up by 1,440 bps YoY and 870 bps QoQ.
  • The Profit Before Tax (PBT) of the company has gone from loss territory to positive territory from negative 65.5 Cr. in Q2FY21 to Rs. 47 Cr. in Q2FY22. While the same was negative 33.4 Cr. in Q1FY22.
  • The Company has turned profitable in the second quarter of FY22. While the company has reported a loss of Rs. 66.7 Cr. in Q2FY21 and of Rs. 28.9 Cr. in Q1FY22. The company has a registered net profit of Rs. 45.7 Cr. in the quarter ended 30th September 2021.
  • The Net Profit Margin stood at 8.9% in the quarter ended 30th September 2021.

2) H1FY22 Performances:

Devyani International- H1FY22 Performances

Devyani International- H1FY22 Performances

  • The Consolidated revenue of the company for the first half-year of FY22 has grown by 169.3% from Rs. 323 Cr. in the half-year ended 30th September 2020 to Rs. 869 Cr. in the half-year ended 30th September 2020.
  • The EBITDA of the company has moved to positive zone from negative zone i.e., from negative Rs. 21.5 Cr. in H1FY21 to Rs. 185 Cr. in the H1FY22.
  • The company has a registered net profit of Rs. 16.8 Cr. in the first half-year of FY22.

3) Core Brands Performances- Quarterly:

i) KFC

a) Revenue & Gross Profit:

Devyani International- Brand Performance- KFC

Devyani International- Brand Performance- KFC

  • The major brand of Devyani International- KFC has reported significant growth. The Revenue from this brand was Rs. 125 Cr. in the Q2FY21, which has gone up to Rs. 203 Cr. in Q1FY22, and now it stands at Rs. 301 Cr. as of the quarter ended 30th September 2021.
  • The Gross Profit has also grown consistently from this brand from Rs. 82 Cr. in Q2FY21, to Rs. 141 Cr. in Q1FY22, and finally to Rs. 208 Cr. in the Q2FY22.
  • The Gross Profit Margin stands at 69.1% in the quarter ended 30th September 2021, which was 65.9% for the same period in the previous financial year.
  • During the quarter, the company added a net of 25 new stores of KFC.

b) Sales Performance:

Devyani International- Sales Performance- KFC

Devyani International- Sales Performance- KFC

  • The overall sales performance of the company is in recovery mode. The On-Premise sales were 56% in Q2FY21 which went down to 35% in Q1FY22, have now again come back to the same level of 56% in Q2FY22.
  • Further, the Off-Premise Sale was 44% in Q2FY21, which rose to 65% in Q1FY22, has again settled at 44% in the quarter ended 30th September 2021.
  • The contribution of the brand towards the company’s sales stood at 22.4% in the quarter ended 30th September 2021 against 13% in the same quarter of the previous financial year.
  • The Average Daily Sales Per Store have also gone up from Rs 68,517 in Q2FY21 to Rs. 1,16,380 in Q2FY22.
  • The Same Store Sales Growth (SSSG) has also improved drastically for the company from a negative 51.6% in the quarter ended 30th September 2020 to 72% in the quarter ended 30th September 2021. The same was 158% in the quarter ended 30th June 2021.

ii) Pizza Hut:

a) Revenue & Gross Profit:

 

Devyani International- Brand Performance- Pizza Hut

Devyani International- Brand Performance- Pizza Hut

  • Another major brand of Devyani International- Pizza Hut has reported decent growth. The Revenue from this brand was Rs. 63 Cr. in the Q2FY21, which has gone up to Rs. 96.5 Cr. in Q1FY22, and now it stands at Rs. 133 Cr. as of the quarter ended 30th September 2021.
  • The Gross Profit has also grown consistently for this brand from Rs. 45 Cr. in Q2FY21, to Rs. 73 Cr. in Q1FY22, and finally to Rs. 101 Cr. in the Q2FY22.
  • The Gross Profit Margin stands at 75.5% in the quarter ended 30th September 2021, which was 71.6% for the same period in the previous financial year.
  • During the quarter, the company added a net of 34 new stores of KFC.

b) Sales Performance:

Devyani International- Sales Performance- Pizza Hut

Devyani International- Sales Performance- Pizza Hut

  • The overall sales performance of this brand is also recovering well. The On-Premise sales were 39% in Q2FY21 which went down to 20% in Q1FY22, have now again come back to the same level of 38% in Q2FY22.
  • Further, the Off-Premise Sale was 61% in Q2FY21, which rose to 80% in Q1FY22, has again settled at 62% in the quarter ended 30th September 2021.
  • The contribution of the brand towards the company’s sales stood at 15.8% in the quarter ended 30th September 2021 against 10.4% in the same quarter of the previous financial year.
  • The Average Daily Sales Per Store have also gone up from Rs 26,456 in Q2FY21 to Rs. 45,090 in Q2FY22.
  • The Same Store Sales Growth (SSSG) has also improved drastically for the company from a negative 37.3% in the quarter ended 30th September 2020 to 73.5% in the quarter ended 30th September 2021. The same was 216.6% in the quarter ended 30th June 2021.

iii) Costa Coffee:

Brand & Sales Performance:

Devyani International- Brand & Sales Performance- Costa Coffee

Devyani International- Brand & Sales Performance- Costa Coffee

  • Costa Coffee has recorded an exceptional quarter. The Revenue from this brand was Rs. 4 Cr. in the Q2FY21, which has gone up to Rs. 3.7 Cr. in Q1FY22, and now it stands at Rs. 9.4 Cr. as of the quarter ended 30th September 2021.
  • The Gross Profit has also grown similar to the revenue growth of this brand from Rs. 3 Cr. in Q2FY21, to Rs. 2.9 Cr. in Q1FY22, and finally to Rs. 7.5 Cr. in the Q2FY22.
  • The Gross Profit Margin stands at 79.8% in the quarter ended 30th September 2021, which was 76.2% for the same period in the previous financial year.
  • The Average Daily Sales Per Store have also gone up from Rs 12,255 in Q2FY21 to Rs. 27,390 in Q2FY22.
  • The Same Store Sales Growth (SSSG) has also improved drastically for the company from a negative 78.7% in the quarter ended 30th September 2020 to 225.9% in the quarter ended 30th September 2021. The same was 344.9% in the quarter ended 30th June 2021.
  • The contribution of the brand towards the company’s sales stood at 33.1% in the quarter ended 30th September 2021 against a negative 78.7% in the same quarter of the previous financial year.

4) Business Highlights:

  • The Company has added 111 new stores in the first half-year of FY22, taking the total count of stores to 803.
  • The company reported strong business recovery post-Covid-19 the second wave. Specifically, there was a robust recovery in KFC in August-September 2021 and encouraging Pizza Hut's performance post-brand restructuring.
  • Further, the company has become a Net-Debt Free company on an external basis.
  • Appointment of Mr. Jatin Mahajan as Company Secretary & Compliance Officer (KMP) of the Company with immediate effect. He will be Compliance Officer for compliances concerning SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, SEBI.

Earnings Call Highlights:

Business Performance:

  • On the demand side, the company witnessed a great recovery as the Covid-19 restriction eases, and the Covid-19 vaccination improves.
  • The company has become a net-debt-free company excluding the promoter’s debt post listing of the company in August 2021.

Inflation & Margins:

  • To mitigate the impact on inflation on the inputs side, the company has developed several layers in the business.
  • The rise in margin is due to the removal of corporate drags which existed earlier.
  • Brand margin is increasing due to several actions of the company primarily the benefit of Operating Leveraging, restructuring the employment model, and also smaller-format stores gaining momentum.

Store Addition:

  • The Company opened 111 new stores across 4 brands in the six months ended 30th September 2021 despite several headwinds caused due to Covid-19 second wave during Q1.
  • In Q2, the company added 68 new stores across all the brands with 25 new stores for KFC, 34 new stores for Pizza Hut in India. With this, the company is present in more than 175 cities in the country.
  • Opened stores in 20+ new cities in the last 6 months.
  • Outside India, the company opened 4 new stores in Nepal in the last 6 months.
  • The total store count as of the period ended 30th September 2021 is 803.
  • In the core brands portfolio, metros account for 340 stores representing 48% of pan-India Core Brand Stores.
  • In KFC, the company looks and is looking for an average size of 1,500 to 1,800 sq. ft. While in Pizza Hut, the average size company is eying for is 600 to 1,000 sq. ft.

Future Outlook & CAPEX Guidance:

  • The Long term focus on store expansion is on consolidating the presence of the company in key metro cities while tapping into smaller towns enabling us to take the brands closer to the customers.
  • On the 3 brands, the CAPEX currently is about a Crores of rupees.
  • The company is looking for adding 200 stores a year.

What Should Shareholders Do?

Devyani International Limited, a QSR player which was registered in August 2021 has posted robust Q2 results and also fulfilled one of the objectives of IPO of clearing off the debt. The company has turned profitable in Q2, has become a net-debt-free company, and also have given strong guidance as well. The Food-Service Market in India is highly underpenetrated as compared to the developed nations, and hence players like Devyani International, which is the largest franchisee of Yum! Brand in India has a great potential to grow in the future. Hence, for any individual who is aggressive and wants to have some allocation in the QSR sector, this stock should be on his/her watchlist. This discussion on Devyani International is not direct advice to purchase/sell the stock, and hence one should follow due diligence before making any investment decisions or do consult any financial advisor.

Originally Published On: https://blog.investyadnya.in/devyani-international-q2fy22-rsult-earning-call-highlights/

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