Burger King India Limited’s performance in the December quarter (Q3FY22) is encouraging. Average Daily Sales (ADS) recovery in Q3 stood at 104% of full year FY20 ADS. This was driven by continued growth in the delivery business, while the dine-in segment posted a muted performance. Thus, distribution ADS recovery is 160% of FY20 levels, while for dine-in is 78%.
“As per the management, restrictions on malls and low traction at stores near metro stations in the north have kept dine-in recovery slightly lower,” analysts at JM Financial Institutional Securities Ltd said in a January 25 report. “It was also evident in its regional development,” the analysts said. Note that the region-wise Q3 ADS recovery versus FY20 level was 95% for North, 119% for West and 108% for both South and East.
see full image
Overall, Burger King’s EBITDA, or earnings before interest, taxes, depreciation and amortization, increased 28% sequentially. 32.8 crores. Q3 Ebitda margin expanded to 11.7%, an increase of 130 basis points (bps) from Q2. One basis point is 0.01%. However, higher depreciation and finance costs meant that the company had a net loss for Q3 15 crores.
Meanwhile, network expansion accelerated with the addition of 20 new stores during the quarter. This increased the total store count to 294 at the end of the third quarter. The company plans to increase this figure to 320 stores by the end of March. Burger King has nine restaurants under construction and 65 more in the pipeline.
After the Q3 results, Burger King shares were flat, though the stock has lost nearly 30% of its value from the 52-week high seen in August on the NSE. Share closed on Tuesday 133.10, . slightly less than 135 It closed on the day of its listing on 14 December 2020. The issue price during the initial share sale was 60.
Going forward, the pace of sales improvement will be an important factor to monitor. It helps that the recovery in December was higher at 111% of FY20 ADS as compared to Q3FY22.
The revival in the dine-in segment also needs to be tracked and so will the margins.
“With the acquisition of BK Indonesia, which has now been approved by shareholders, maintaining historical growth rates and steady margin improvement here will also be other key monitorables,” said analysts at JM Financial.
On the bright side, BK Cafe outlets (18 opened in Q3) offer opportunities for incremental growth. Nevertheless, increasing overall competitive intensity remains a major risk in general.
Never miss a story! Stay connected and informed with Mint.
download
Our App Now!!
,