Beyond Domino’s: 3 QSR Stocks Ready for a Festive Comeback
Quick Service Restaurant (QSR) stocks in India have struggled for a while, trailing behind the wider consumption story. However, with demand in rural areas bouncing back, inflation easing, and prices still reasonable, the sector is beginning to perk up. The upcoming festive season could be the spark investors have been looking for.
Jubilant Foodworks has long been the front-runner, but competitors Devyani International, Sapphire Foods, and Restaurant Brands Asia are now stirring. It’s the perfect chance to take a fresh look at all of them.
**1. Devyani International: The Yum Brands Growth Engine**
Devyani, backed by the Jaipuria Group, is the biggest Yum Brands franchisee in India. It runs KFC, Pizza Hut, Taco Bell, and more, with more than 2,145 stores in India and abroad.
**Q1 FY26 Snapshots:**
– **Revenue:** ₹13.5 billion, up 11% YoY, with India contributing 68.8%.
– **EBITDA Margin:** 15.1%, down 320 bps, mainly from higher indirect costs.
– **Profit after Tax:** ₹22 million, a 90% YoY drop.
**Brand Comeback:**
KFC’s India revenue advanced 10.5% YoY. Same-store sales dipped slightly but improved significantly from a year earlier.
### Pizza Hut Reports Revenue Growth
Pizza Hut just reported a 2.9% year-over-year leap in revenue. The same-store sales drop also tightened, moving from -8.6% to -4.2%.
#### What’s Next?
The company is branching out past KFC and Pizza Hut by backing brands like Biryani By Kilo and New York Fries. Modernizing Pizza Hut and fine-tuning operations will help manage rising ingredient costs.
#### Stock Watch
Devyani is now priced at 26.6 times EV/EBITDA. That’s a solid drop from its four-year average of 36.8 times.
### Sapphire Foods in Action
Sapphire runs 974 outlets across India, Sri Lanka, and the Maldives. The mix includes 510 KFC, 454 Pizza Hut, and 10 Taco Bell restaurants.
#### Q1 FY26 Round-Up
– Revenue: ₹7.7 billion, up 8% year-on-year, thanks to new store openings.
– EBITDA: ₹1.1 billion, a 9% drop; margins slipped 270 basis points to 14.6%.
– Profit: A ₹17.4 million loss, slipping from ₹81.9 million profit last year.
#### Brand Highlights
KFC revenue climbed 11% year-over-year, while same-store sales held steady. Pizza Hut revenue slid 6%, and same-store sales dipped 8%. Sri Lanka did well, hitting an average daily sales figure of ₹103,000.
#### Recovery Playbook
Sapphire is tweaking menus, testing smaller outlets, and borrowing successful Sri Lankan moves for the Indian market. KFC margins hit a low of 15.7%, but rising demand is expected to lift profitability again.
**Valuation:** EV/EBITDA stands at 22.4x, just above the 4-year average of 21x.
**3. Restaurant Brands Asia:** The Burger King of India
Restaurant Brands Asia holds the master franchise for Burger King across India, running 519 locations, and also has operations in Indonesia with its Burger King stores and Popeyes outlets.
**Q1 FY26 Highlights:**
– **India revenue:** ₹5.5 billion; 12.6% year-on-year growth; average daily sales and same-store sales growth at 2.6%.
– **Indonesia revenue:** ₹1.4 billion, down 6.9% year-on-year but showing early signs of stabilization.
– **Consolidated EBITDA margin:** 10.8%, an increase of 60 basis points; net loss narrowed to ₹450 million, a 13.5% smaller deficit than a year ago.
**Growth Strategy:**
– Increase India store count to 800 by FY29.
– Lift gross margin from 67.7% to about 70%.
– Capitalize on premium product demand for stronger profitability.
**Valuation:** EV/EBITDA at 18x, nearly 50% cheaper than the 4-year median of 36x.
**Bottomline**
Rural demand is bouncing back, inflation is easing, and valuations still look appealing, setting the stage for a potential QSR rally during the festive season. Jubilant may have led the pack, but Devyani, Sapphire, and Restaurant Brands Asia are flashing early recovery signs. They are boosting brand loyalty, tightening operations, and executing smart expansions. Investors would do well to revisit these names before the festive surge.
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