EUR 120.00 For Business Accounts Only

MOSL: BARBEQUE NATION HOSPITALITY: Robust dine-in revenue leads to a significant beat

BARBEQUE NATION HOSPITALITY: Robust dine-in revenue leads to a significant beat

(BARBEQUE IN, Mkt Cap USD0.6b, CMP INR1196, TP INR1300, 9% Upside, Neutral)

• The first normal quarter for BARBEQUE after the lifting of COVID-related restrictions witnessed a strong performance in dine-in, led by realization and covers. Delivery fell ~6% QoQ, especially in the Box product.
• While the second quarter is usually subdued, the recovery momentum in dine-in is likely to result in healthy earnings in 3Q and 4QFY23.
• Valuations are fair at 18.2x FY24E pre Ind AS 116 EV/EBITDA. We maintain our Neutral rating.

Beat on all fronts

• Sales grew 3x YoY to INR3.1b (est. INR2.5b), with SSSG of 182% (est. 110%). EBITDA stood at INR705m (est. INR460m). Adjusted PAT came in at INR160m (est. INR45m).
• It opened 11 and closed one Barbeque Nation store, taking its total store count to 176 in India and six internationally at the end of 1QFY23. It has 15 extension kitchens for BBQN and 13 Toscano outlets too.
• Gross margin rose 790bp YoY to 66.8% (est. 65.1%). EBITDA margin came in at 22.4% (est. 18%) v/s -17.5% YoY and 17.7% QoQ.
• EBITDA adjusted for Ind AS 116 came in at INR460m v/s a loss of INR342m in 1QFY22. EBITDA margin came in at 14.6% in 1QFY23.

Highlights from the management commentary

• Both covers and realization clocked a healthy growth in 1QFY23. As per the management, there isn't any significant 'revenge consumption' at play.
• Average covers are still 10% lower than pre-COVID levels as the contribution from corporates are yet to return to pre-pandemic levels.
• Revenue from the Delivery business fell 6% QoQ. Revenue from the Box product has fallen, but a la carte delivery has grown sequentially.
• BARBEQUE is adding a delivery-only Biryani brand, with a regional launch first (which may take three-to-six months), before rolling out nationwide.
• A higher share of dine-in enabled better EBITDA margin. Calibrated price hikes and operating leverage aided margin. The company has raised prices by 4-5% in Apr-May'22 in two phases.