Near-term prospects hinge on the progress of
the second wave of Covid-19. A lockdown will dent prospects as 60 per cent of
revenues come from the dine-in segment.
Burger King India, the
exclusive national franchisee of global fast food giant Burger King, has had a
bumper listing with gains of 108 per cent.
The strong investor demand
was largely due to robust growth prospects of the organised fast food market
and the company’s performance in recent years (before the pandemic).
The strong returns
performance of the listed peers rubbed off on the IPO.
Jubilant FoodWorks, the
Indian franchise for Domino’s Pizza, has generated compound annual returns of
44 per cent since its listing in February 2010.
Despite the 19 per cent
annual revenue growth over FY15-20 for the organised quick service restaurant
(QSR) chains, experts believe the trend is likely to continue and estimate it
to grow upwards of 20 per cent on average during FY20-25.
While the overall QSR trend
is positive, prospects of Burger King’s key segment burgers and sandwiches are
better.
While pizzas and
chicken-based products posted a 12-13 per cent growth between FY15-20, burgers
and sandwiches grew 19 per cent annually.
Though Burger King started
operations later than competitors, it has been expanding aggressively.
During FY17-20, the company
tripled its outlets and this pace is expected to continue.
Revenues also doubled over
FY18-20. Its Master Franchise Agreement states that it has to roll out 700
outlets by December 2026 from about 270 restaurants now.
Near-term prospects hinge
on the progress of the second wave of Covid-19.
A lockdown will dent
prospects as 60 per cent of revenues come from the dine-in segment.
The Street is bullish about
the long-term growth trajectory, but analysts believe the stock is factoring in
the near-term upsides.
Investors could look at it
on dips.