Devyani International Limited — Investor Meet, 19-11-2024: Analysts/Institutional Investor Meet/Con. Call Updates

1. **Financial Performance:** Devyani International reported consolidated revenue of Rs. 1,222 crore for the quarter, marking a 49% year-over-year increase. For the first half, revenues reached Rs. 2,444 crore, up by 47%. The gross margin stood at 69.3%, slightly improved from the previous quarter but down by 1.5% compared to Q2 FY24 due to the consolidation of a lower-margin business in Thailand. Operating EBITDA for the quarter was Rs. 114 crore, translating to a pre-Ind-AS margin of 9.4%. The profit before tax was negative at Rs. 4 crore, influenced by margin pressures and currency fluctuations.

2. **Future Outlook and Growth Drivers:** The company plans to expand its brand portfolio further with new lifestyle QSR brands, including "tealive," "New York Fries," and "SANOOK KITCHEN." Their strategy aims to enhance market presence through store expansion and product innovation. The management reaffirmed commitment to opening 100-110 KFC stores and 60-70 Pizza Hut stores in the current and upcoming years.

3. **Order Book and Operational Updates:** During the first half, Devyani added 139 new stores, bringing the total to 1,921. The impact of vegetarian consumption during festival periods traditionally softens Q2 performance, which is expected to normalize as conditions improve in subsequent quarters.

4. **Analyst Q&A Insights (Detailed):**

- **Revenue and Profitability:** Analysts questioned the decline in KFC's same-store sales growth (SSSG) and the impact of geopolitical issues. Management indicated a cautious outlook but highlighted potential recovery in key markets.

- **Market Position and Competitive Landscape:** The conversation included potential growth categories and the lesser capital requirements associated with new brand franchises compared to traditional models.

- **Operational Challenges or Risks:** Concerns regarding supply chain issues and consumer sentiment were acknowledged, with management confident in their ability to navigate these challenges.

- **Capex and Capital Allocation:** The capital expenditure for new franchises is expected to be low, focusing initially on small-format stores.

- **Strategic Priorities and Long-Term Vision:** Emphasis on leveraging consumer trends and market positioning for new QSR brands, with a potential to capture evolving categories.

5. **Market or Regulatory Updates:** No significant regulatory changes were highlighted, but ongoing geopolitical situations have affected operations in Nigeria and Thailand.

6. **Strategic Focus Areas:** The company is focused on expanding its presence in smaller formats with low-capex models, aligning with current consumer trends. The overall sentiment remains positive with a forward-looking strategy to leverage emerging food categories.

7. **Investor Insight:** Given the strong revenue growth and strategic brand expansions, the financial health appears robust. However, ongoing geopolitical risks and consumer sentiment challenges necessitate caution. The overall strategic direction may suggest a ‘buy’ position for discerning investors looking at long-term growth potential alongside risk management considerations.