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    Devyani Intl.

    DEVYANIGood
    Consumer Services·11 Feb 2025
    Management Summary

    Devyani International delivered a quarter of significant footprint expansion, surpassing 2,000 stores globally. While consolidated revenue growth was robust at 53.5% (boosted by Thailand), the domestic business saw a more modest 9.6% YoY growth. Management is pivoting strategy by moderating Pizza Hut expansion to focus on performance while remaining aggressive on KFC and new brand launches planned for Q1 FY26.

    Highlights

    7

    • Consolidated revenue reached ₹1,294 crore, a 53.5% YoY growth, aided by the Thailand acquisition.

    • Achieved a major milestone of 2,032 total stores, crossing the 2,000-store mark ahead of original guidance.

    • Consolidated operating EBITDA (pre-IndAS) stood at ₹131 crore with a margin of 10.1%, up 70bps QoQ.

    • KFC India reported revenue of ₹570 crore with a brand contribution margin of 17.2%, showing sequential improvement.

    • Pizza Hut India added 51 new stores but continues to face performance pressure with a low brand contribution margin of 2.1%.

    • International business (Thailand, Nigeria, Nepal) contributed ₹430 crore in revenue with a 16.6% brand contribution margin.

    • The company turned profitable at the PBT level, reporting ₹9 crore versus a loss of ₹4 crore in the previous quarter.

    Concerns

    1

    • Pizza Hut Performance Lag

    Key financials

    Single quarter

    04 metrics
    1. 01Revenue₹1,294 Cr+53.5%YoY
    2. 02Pre-IndAS EBITDA Margin10.1%
    3. 03Consolidated PBT₹9 Cr+3.3%QoQ
    4. 04Total Store Count2,032 stores+5.8%QoQ

    Segment breakdown

    • KFC India₹570 Cr47.9%
    • Pizza Hut India₹190 Cr16.0%
    • International Business₹430 Cr36.1%
    Donut· Share of Revenue

    Guidance & targets

    4
    CategoryTargetPriority
    Margin
    KFC Brand Contribution Margin
    19-20%
    		High
    Capacity
    Thailand Store Additions
    20-25 stores
    		Medium
    Revenue
    Thailand Revenue Growth
    11-12%
    		Medium
    Other
    New Brand Launches
    3 brands
    		High

    Risks & concerns

    5
    RiskSeverity

    Food Inflation

    Rising prices of oil, chicken, cheese, and coffee beans impacted gross margins by 60bps QoQ. — Management acknowledged

    medium

    Geopolitical and Regional Volatility

    Performance in Kerala, Assam, and West Bengal has been bottomed out due to local geopolitical situations. — Management acknowledged

    medium

    Pizza Hut Performance Lag

    Brand contribution margin is very low at 2.1%, and ADS remains flat despite festive season. — Both acknowledged

    high

    Areas of Evasion(2)

    • Specific ADS targets for Pizza Hut
    • Quantifying the exact rupee impact of Nigeria losses for FY26 modeling

    Q&A highlights

    3

    “Our sister franchise partner is predominantly present in the large metros... we have primarily seen the KFC numbers getting impacted in Kerala, Assam and West Bengal, which are very highly concentrated because of geopolitical situation.”

    Explains why Devyani's KFC performance might lag competitors due to geographic mix rather than brand weakness.

    asked by Adithya P. S. S., JP Morgan

    2 min read5 chapters

    Detailed Narrative

    01

    Store Expansion Milestone and Strategic Pivot

    Devyani International successfully crossed the 2,000-store milestone in Q3 FY25, reaching 2,032 stores ahead of its original guidance. The company added 111 net new stores during the quarter, with KFC (44) and Pizza Hut (51) leading the additions. However, management signaled a strategic pivot, stating they will moderate Pizza Hut expansion going forward⏳ to focus on improving store-level performance, while remaining bullish on KFC and Costa Coffee.

    02

    KFC Resilience Amidst Regional Headwinds

    KFC India remains the bedrock of the portfolio, contributing ₹570 crore in revenue with a healthy 17.2% brand contribution margin. Despite flat sequential ADS of ₹96,000, management highlighted that performance was impacted by specific regional issues in Kerala, Assam, and West Bengal. They maintain a medium-term target of 19-20% brand contribution margins as ADS scales toward ₹100,000, supported by cost optimization in labor and electricity.

    03

    Pizza Hut Turnaround Remains a Work in Progress

    Pizza Hut continues to face challenges, with brand contribution margins sitting at a slim 2.1% (₹4 crore). While ADS remained flat QoQ at ₹35,000, management noted that SSSG is nearing breakeven after being double-digit negative in previous quarters. The company is recalibrating marketing spends and focusing on 'Value Menu Items' and 'Epic Savers' to drive footfalls, though they admitted the response to promotions has been better for KFC than for Pizza Hut.

    04

    International Operations and Currency Stabilization

    The international segment, primarily Thailand and Nigeria, contributed ₹430 crore to the top line. Nigeria is showing signs of currency stabilization, with brand contribution returning to over 20%. In Thailand, the company added 9 new KFC stores and plans to add 20-25 more in FY26. A temporary 100bps drop in international gross margins was attributed to currency translation impacts on closing inventory valuation in Thailand.

    05

    Future Growth Levers: New Brands and Food Courts

    Management is preparing for the next leg of growth by launching three new QSR brands in India starting Q1 FY26. Additionally, the Food Court business is gaining momentum, including a new JV with PVR INOX that opened its first court in Kota. Vaango continues to perform well with double-digit SSSG, although its overall ADS is being diluted by a high proportion of new, immature stores (31 added in 9 months).

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.