- Total Store Count: 1,836 stores as of June 30, 2024.
- Core Brand Stores: 1,738 stores (KFC: 970, Pizza Hut: 576, Costa Coffee: 192).
- Revenue: INR 1,222 crore for Q1 FY25, a growth of 44.3% YoY and 16.7% QoQ.
- Gross Margin: 69.2% for Q1 FY25.
- Brand Contribution Margin: 15.3% for Q1 FY25, an improvement of 1.8% QoQ.
- Operating EBITDA (pre-Ind AS): INR 141 crore, a growth of 47% QoQ.
- Operating EBITDA Margin (pre-Ind AS): 11.6% for Q1 FY25.
- Reported EBITDA (post-Ind AS): 18.3% for Q1 FY25, an improvement of 1.7% QoQ.
- PBT: INR 31 crore for Q1 FY25, compared to a loss of INR 38 crore in the previous quarter.
- KFC India Revenue: INR 555 crore for Q1 FY25, a growth of 12.3% QoQ.
- KFC India ADS: INR 104,000 for Q1 FY25.
- KFC India Gross Margin: 69.5% for Q1 FY25.
- KFC India Brand Contribution Margin: 19.5% for Q1 FY25.
- Pizza Hut India Revenue: INR 182 crore for Q1 FY25.
- Pizza Hut India ADS: INR 36,000 for Q1 FY25.
- Pizza Hut India Gross Margin: 76.8% for Q1 FY25.
- Pizza Hut India Brand Contribution Margin: 5% for Q1 FY25.
- Costa Coffee Revenue: INR 45 crore for Q1 FY25.
- Costa Coffee Gross Margin: 75% for Q1 FY25.
- Costa Coffee Brand Contribution Margin: 15% for Q1 FY25.
- International Revenue: INR 390 crore for Q1 FY25.
- International Gross Margin: 63.7% for Q1 FY25.
- International Brand Contribution Margin: 14.8% for Q1 FY25.
- International Reported EBITDA: 13.1% for Q1 FY25.
Release Date: August 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Devyani International Ltd (BOM:543330, Financial) added 54 new stores in Q1 FY25, bringing the total store count to 1,836.
- The company reported a 44.3% year-over-year growth in operating revenue, reaching INR1,222 crore.
- The Indian business witnessed an 11.7% quarter-on-quarter growth with improved Average Daily Sales (ADS) for both KFC and Pizza Hut.
- The Thailand business demonstrated good growth with new store openings and strategic focus on customer delight.
- Consolidated operating EBITDA on a pre-Ind AS basis grew by 47% to INR141 crore, reflecting improved cost leverage and better ADS.
Negative Points
- The Nigerian currency continued its weakening trend, resulting in an overall loss of INR22.5 crore due to USD-denominated liabilities.
- Macroeconomic factors such as international conflicts and global boycotts impacted operations in certain geographies.
- Despite improved ADS, Pizza Hut's brand contribution margin remains low due to increased marketing expenses.
- The gross margins for the consolidated business were flat at 69.2%, with the Thailand KFC business operating at a lower gross margin compared to the Indian KFC business.
- The company faces headwinds from the West Asia conflict and brand boycotts, affecting consumer sentiment and sales.
Q & A Highlights
Q: My first question is on Chairman's opening comment. He had mentioned that the company is optimistic of a rebound in the industry in the festive season. I just wanted to understand those comments better. Are there any signs or any data points that you are seeing based on which you are turning optimistic?
A: Saurabh, typically, we've seen in the past also that in any market, it is a festival season which perks up the store, which kind of perks up the overall consumer sentiment. And that's the reason we are basing our view that this festival season, we could see -- because we've been in this kind of scenario now for the last almost five to six quarters. And that's how we are hoping that festival season could probably be a turnaround situation for the industry.
Q: Second one on KFC, if I recall correctly, you were more impacted because of I think Adhik Maas in the September quarter last year. Should we expect a sharp improvement from current minus -- your base is [minus 4] next quarter. Can we hope for a flattish SSSG on that base?
A: So Saurabh, you're right. But again, as you know, I mean, the overall macro economic situation or the macro environment continues to evolve, right? So for example, it is not absolutely the same environment which was there last year. We are facing headwinds on account of this whole West Asia war and the boycott of brands which is going on. And therefore, I mean, there is -- so there are multiple other factors also at play, not just the Adhik Maas as far as the current quarter is concerned. Our store count is also much better versus where we were last year.
Q: One last one, if I can add, if I subtract the brand contribution of KFC India, Pizza Hut and Costa from the total India brand contribution, I'm getting a number of INR12 crore, which I'm assuming is your non-core India businesses. This number is much higher than in the past. Is there any one-off in the India non-core which is one thing the profits the contribution?
A: Saurabh, there are two, three things at play here. One is, obviously, we have other small businesses also apart from the three core brands and Vaango, which includes the food courts and some of the non-core businesses at the airports and so on and so forth. And at the same time, because this time we are giving the India business and international business separately, there are some elimination entries because of the intercompany transactions. So therefore, that also kind of -- so you would see that the total India and total international also would not equate to consolidated because in the consolidation, the elimination of entry will also happen. So these are the two reasons why on an overall basis, you will not be able to reconcile the numbers. But let's say, if I were to evaluate India performance separately and international performance separately, those are the numbers strictly speaking.
Q: My question again is with regards to the Saurabh's earlier question in this. Because earlier that you need to subtract the Pizza Hut and KFC and all the other numbers. And you see it the other domestic bank contribution number, the run rate is INR3 crore to INR4 crore, INR5 crore and this time around its [INR12 crore]. So I'm guessing the eliminations who have been existing earlier as well. So on the other way around, can this [INR12 crore] number be number be sustainable number going ahead. That's the question.
A: The difference was that if you go back, let's say, a couple of quarters, obviously, Thailand wasn't there. And Thailand is a large business compared to, let's say, the Nepal and Nigeria operations which were there. So that is the reason. We do charge some small management fee from the business operations. And that is how it gets eliminated.
Q: And sir, the other question even as you said that if we total India international business, that would not actually not equate the consol business. So is the adjustment for the ForEx loss that is reflecting in the international business and that is why the difference is there?
A: Yeah. The ForEx loss also gets treated differently because, for example, let's say, when we consolidate, there is some element of ForEx loss which gets into OCI. There is some element which comes into the P&L line item. Whereas at the Nigeria level, everything is supposed to be recognized in the P&L.
Q: And sir, if you can help us out what is really driving the operational performance improvement in the international business? Because if we go by the last year -- the last quarter run rate, it was around 10%, 11% and it is a sharp jump this quarter around. So what is really driving that?
A: Gaurav, if you see the ADS has improved across all of our brands and the operations. So let's say, KFC India, the ADS is better, it's INR104,000 versus INR93,000 in the previous quarters. If you look at Pizza Hut India, it is [36 versus 32]. If you look at Nepal, Nigeria and Thailand, the ADS is better versus the previous quarter. And therefore, that gives you a better leverage from a P&L perspective. At the same time, we've been kind of unrelenting as far as the cost-saving measures are also concerned. And there is some element cost saving measures and a cost leverage impact because of the better ADS numbers.
Q: Sure. Anything specifically related to Thailand here, I mean because that business was only acquired by you in the last quarter. And because now we have a quarter that we assumed it. So any particular one-offs that you have been getting in terms of benefits that will be sustainable going ahead?
A: No, there are no one-off benefits from Thailand.
Q: Hi, Manish. So just reconfirming what you said. So basically, the sales of India plus international minus consol, the difference I'm getting is [77 million]. So does this mean that basically the services at the parent is providing to the Thailand subsidiary for which it is getting charged. That is roughly equal to about [77 million], which comes into the sales of India and probably goes into the cost line item of Thailand.
A: Yes. So it is basically Thailand, Nepal and Nigeria. So that is how it comes in the separate this thing and then --
Q: Got it. So if I have to actually evaluate the India performance, I should be deducting [77 million] from the pre-Ind AS EBITDA or the post-Ind AS EBITDA to get the true performance of India. Would that understanding be correct?
A
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
