Devyani International share price jumps 6%; Kotak expects 22% upside in KFC operator stock— key reasons why

Devyani International share price jumped almost 6 per cent in intraday trade on the BSE on Tuesday, April 15, looking set to end higher for the fourth consecutive session. Devyani International shares opened at ₹157.20 against its previous close of ₹155.75 and jumped 6 per cent to ₹164.80 during the session. Around 1:20 PM, the stock traded 4.75 per cent higher at ₹163.15. 

Devyani International is one of India’s largest operators of chain quick-service restaurants (QSRs). The company claims it has an extensive network of over 2,000 restaurants as of December 31, 2024, across India, Thailand, Nepal and Nigeria.

Devyani International is also the largest franchisee for Yum Brands (KFC and Pizza Hut) in India. It also operates Costa Coffee and has its in-house brand, Vaango, which focuses on South Indian vegetarian cuisine.

Devyani International share price trend

On a monthly scale, the stock has suffered losses in the last three months. Even at today's high of ₹164.80, the stock is down about 10 per cent year-to-date.

The QSR stock recently touched its 52-week low of ₹130.05 on April 7 this year. It hit a 52-week high of ₹222.75 on September 23 last year.

Kotak upgrades the stock to a buy

Kotak Institutional Equities (Kotak Securities) has upgraded the stock to a 'buy' from an 'add', revising the fair value to ₹190 from ₹175. This implies a 22 per cent upside in the stock from its previous session's close of ₹155.75.

Kotak has based his positive views on the stock due to a significant correction of about 20 per cent in the last three months while anticipating a better financial year than last year.

"Devyani’s FY25E operating print was impacted by persistent weakness in QSR demand and potential execution lapses following a few senior/mid-level management exits. We expect FY26E to be a better year due to pickup in SSSG (same-store sales growth), aided by weak base (8/9 consecutive quarters of SSS decline for KFC/Pizza Hut India) and some improvement in the underlying demand," said Kotak.

Moreover, Kotak believes the reduction in personal income tax will augur well for QSR.

Besides, the brokerage firm believes KFC’s fundamentals remain intact, barring short-term headwinds.

"Short-term headwinds (weak Q4FY25E) aside, KFC’s (India) fundamentals are intact. KFC enjoys strong brand equity and unit economics, and the market opportunity is significant, given KFC’s under-penetration (about 1,225 KFC stores in India as of Mar-25E versus Domino’s 2,179) and sub-5 per cent share of India’s chicken consumption," Kotak observed.

Kotak expects Devyani to add 100 KFC stores per year in India over the next three years (nearly 13 per cent store CAGR), taking the count to 1,000 stores.

Kotak pointed out that KFC remains an undisputed leader in the QSR chicken category, given the limited progress of Popeyes and McDonald's.

The key rationale for upgrading to buy from add: (1) the stock price has corrected 20 per cent in the past three months, (2) we expect FY26E to be a better year, and (3) optionality (Pizza Hut, new restaurant brands—Tealive, New York Fries and Sanook Kitchen, partnership with PVR-INOX to operate food courts and further portfolio augmentation through organic and inorganic route)," said Kotak.

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Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions, as market conditions can change rapidly, and circumstances may vary.