Motilal Oswal signals buy for Burger King after shares rise over 5% in a day

Motilal Oswal observed that the fast-food company had changed its business model through a barbell product strategy and the introduction of BK Cafe which can allow it topline and margin expansion.

The share prices of Burger King India rose 5.96% over the course of the day to close at Rs 178.70. The rise marks a sharp transformation for the scrip which fell to Rs 165.75 on July 15. The company recorded its 52 weeks high last year on December 15 when it rose to Rs 219.15. Off late, pandemic induced lockdowns in various states of the country had dented Burger King’s share price.

The strong surge in price prompted investment advisory firm Motilal Oswal Financial Services to start covering the share. Motilal Oswal now recommends a buy rating for Burger King with a target price of Rs 210 per share. For a three year term, it gives a target price of Rs 365 based on a 30% compound annual growth rate(CAGR).

Motilal Oswal observed that the fast-food company had changed its business model through a barbell product strategy and the introduction of BK Cafe which can allow it topline and margin expansion. “aggressive store network expansion and capped royalty rate will also be key drivers of EPS growth,” it added.

The investment firm also expects other listed companies in the sector to perform well owing to strong tailwinds led by the COVID-19 situation. In its outlook for Burger King, the firm has projected sales of 71% and EBITDA CAGR of over 286% between FY21 and FY23E. Similarly, in the time frame between FY21 and FY26E, sales and EBITDA CAGR will likely be 43% and 110% respectively.

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