Why Burger King India share rose over 4% amid a falling market

Share of Burger King India rose over 4% today after financial services firm Motilal Oswal initiated coverage of the quick service restaurant firm with a ‘buy’ call. It gave a target price of Rs 210, nearly 25 percent higher from the stock’s Friday’s close of Rs 168.60.

The stock has gained 4.51% in the last 2 days. The share touched an intraday high of Rs 175.8 rising 4.27% against previous close of Rs 168.60 on BSE. Burger King share is trading higher than 5 day, 20 day, 50 day, 100 day and 200 day moving averages.

The share has gained 12.16% in one month.

Total 2.93 lakh shares changed hands amounting to turnover of Rs 5.12 crore on BSE.

Market cap of the firm rose to Rs 6,673 crore on BSE.The stock opened at Rs 168 against previous close of Rs 168.60.

At 1:48 pm, the stock was trading 3.35% higher at Rs 174.25 on BSE. Meanwhile, Sensex lost 559 points to 52,583 and Nifty fell 158.75 points to 15,762 in afternoon session.

“We believe Burger King’s premium multiples are likely to sustain on account of its strong growth profile. We initiate coverage with a buy rating and a target price of Rs 210 (28 times September 2025 EV/EBITDA). Based on a three-year perspective, we arrive at a target price of Rs 365 per share (30 percent CAGR), assuming 25 times multiple,” Motilal Oswal said.

The brokerage firm sees all listed Indian quick-service restaurants to be significant beneficiaries of the strengthening tailwinds (led by COVID-19).

“Burger King will enjoy an attractive opportunity for both topline and margin expansion. This will be led by a big shift in its business model through the introduction of a barbell product strategy and BK Café. In addition, aggressive store network expansion and capped royalty rate will also be key drivers of EPS growth,” Motilal Oswal said.

Burger King is likely to clock sales and EBITDA CAGR of 71 percent and 286 percent, respectively, over FY21-23E and over FY21-26E. The company’s sales and EBITDA CAGR are expected to stand at 43 percent and 110 percent, respectively, the brokerage said.

On December 14, 2020, the stock made its market debut listing at 92.25% premium over issue price on BSE. Share of Burger King India opened at Rs 115.35 against issue price of Rs 60.

On NSE, the share opened 87.5% higher at Rs 112.50 against the issue price.

Later, the mid cap share closed 130% higher to its issue price. Share of Burger King India ended 130.67% or Rs 78 higher than the issue price on BSE. On NSE, the stock closed 125% or Rs 75 higher above its issue price of Rs 60.

Since then, the company has seen slowdown in business activities due to lockdowns imposed to contain Covid-19 pandemic.

The effect of lockdown is reflected in the stock which has lost 0.88% since the beginning of this year despite clocking healthy gains at the end of last year.

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