Burger King –Riding on Multiple Pillars of Opportunities

Burger King recently reported positive numbers for the Q2, 2021. Company has managed to achieve growth in terms of Revenue, EBITDA, Store Growth. As the lock down restrictions are easing, vaccination drive is advancing, and economic activities are resuming, Burger King is regaining its sweet spot despite stiff competition in the food business. .

Management is confident of retaining the growth. Company has reported positive financials in Q2 with turnover of Rs 245 Crores compared to 149.7 Crores in Q1. Company has achieved 64% increase in revenues on Quarter on Quarter and its sales have recovered substantial sales in comparison to pre-COVID numbers in FY 2020, largely driven by recovery in food delivery and dine -in. The food delivery recovery is around 165% and recovery in dine-in is approx.  65%. Dine-in recovery is expected to be continued in positive direction.

On the regional performance, Western Region sales have recovered 114%, Eastern Region sales have recovered 114% and Northern Region sales recovery is around 92%.   From Q1 to Q2 GP moved by 20bps and Company has EBITDA of Rs 40.7 Crores at the restaurant level and Rs 25.6 Crores at company level.

Along with the growth in the number of restaurants, Company is also expanding by acquiring Burger King Business in Indonesia. Company has submitted binding offer to acquire 83% stake at a valuation of USD $183 million. Company is also developing BK app for advancing its food delivery business.

Company also has plans to launch 75 BK Café over a few years period and have opened first one in Churchgate. 10 Cafes are in the process of construction.  Company is focussing on four key pillars for driving growth i.e. strengthening the Whopper franchise, Stunner Menu to drive traffic, scaling up BK Café and building BK app platform. Company’s Average Daily Sales (ADS) has improved from Rs 74000 per store to Rs 104000 per store.

The Burger is one of the largest burger brands globally, with a global network of more than 18,000 restaurants, operating in more than 100 countries including U.S. territories and also one of the fastest growing international QSR chains in India. Company has national master franchisee of the BURGER KING brand in India for developing and operating Burger King branded restaurant stores in India. Company started building restaurants in India about 7 years ago, opening its first restaurant in Select City in Saket on November 9th and have built a portfolio of 274 restaurants. Around 20 restaurants are in the process of construction and company have a pipeline of another 38 restaurants. This is the part of the company’s vision to build a portfolio of 700 restaurant by 2026.

Burger King has a very strong operational team led by Cecily Thomas and business teams are committed to build delivery and dine-in business, which are recovering post covid.

Company is continuously innovating to improve its business and delivery service. It has acquired around 100 e-scooters and is in the process of adding fleet of another 250 to 300 e-scooters. Company is investing in technology for improving the business .

According to various data reports, delivery market in India has grown at the rate of 21.4% CAGR between FY 2016 and 2020( from US$4.7 billion in FY 2016 to US$10.2 billion in FY 2020). The market is expected to touch US$18.1 billion by FY 2025, growing @ 12.2% CAGR.

Burger King IPO was launched in Dec 2020 @ Rs 60 Per share. It is currently trading at Rs 156.75 and have a market cap of Rs 6019.59 Crores (Closing price on 24th November, BSE ).

Burger king has multiple drivers to drive the future growth and may turn profitable in coming years. It is set to benefit from its global experience and strong corporate Governance. Various brokerage houses are bullish on it. If it continues the growth momentum it can turn out to be a good investment in future.

Bureau Galactik Views

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