Macquarie said sustaining the improvement in same-store sales growth seen in January will be critical for Devyani International’s near-term outlook, even as the company’s third-quarter EBITDA came in below expectations.
The brokerage noted that January delivered a positive same-store sales growth trend across most formats, barring Pizza Hut, marking a welcome change after a volatile demand environment. Macquarie highlighted that this pickup, if sustained through the fourth quarter, could support operating leverage and margin recovery, though it remains cautious given the company’s past experience of demand “false starts”.
Macquarie said it liked the profitability improvement in Devyani’s recently acquired brands, particularly Vaango, and flagged that Biryani by Kilo achieved break-even ahead of the March 2026 target, which reflects improving execution. The brokerage also pointed to a healthy sequential recovery in gross margins across formats, which management expects to sustain, alongside continued healthy growth in international operations.
However, Macquarie flagged several concerns. Margin weakness persists across most Indian formats, while India overheads remain elevated, even though management expects these to stabilise at around 5% of sales going forward. The brokerage also expressed caution over whether the January demand improvement can be sustained into the fourth quarter, noting that Devyani’s recovery path has seen interruptions in the past.
Overall, Macquarie maintained an Outperform rating on Devyani International with a target price of ₹160, while emphasising that consistency in same-store sales growth will be the key monitorable in coming quarters.
Disclaimer: The views and recommendations above are those of Macquarie. Business Upturn does not endorse them. Please consult a financial advisor before making investment decisions.
