Burger King India (BURGERKI IN)

Rating: BUY | CMP: Rs163 | TP: Rs242

November 12, 2021 BK Café launch, Delivery sustainability positive

Q2FY22 Result Update Quick Pointers:

☑ Change in Estimates | ☑ Target |  Reco  4 stores opened during 2Q22, 20 stores under execution and 38 in pipeline.

Change in Estim ates  2Q ADS at 95% of FY20 Nos. Delivery/Dine-in ADS recovery at 165%/65%
Current Previous
FY23 E FY24 E FY23 E FY24E
 Oct’21 ADS at 101% of FY20. Delivery/Dine-in ADS recovery at 162%/74%.
Rating BUY BUY
Target Price 242 251
Sales (Rs. m) 14,506 19,010 14,506 19,010  Dine in contribution up to 52% in Oct’21 (28% in 1Q). Expect Dine in
% Chng. - -
EBITDA (Rs. m) 2,252 3,466 2,437 3,602 contribution to return to 60-65%.
% Chng. (7.6) (3.8)
EPS (Rs.) (0.3) 1.4 0.3 1.9 Burger King Story remains on track with 95% ADS recovery in 2Q21 and 101%
% Chng. NA (24.7)
ADS recovery in Oct’21. Delivery ADS sustained at 162% despite comeback
of Dine-in is positive. Soft launch of BK Café during 3Q22 will help increase
Key Financials - Standalone
occasions thereby improving demand during non-peak hours. Innovative
Y/e Mar FY21 FY22E FY23E FY24E
Sales (Rs. m) 4,945 10,341 14,506 19,010 marketing initiatives during cricket IPL/T20 on BK App resulted in 50% growth
EBITDA (Rs. m) 150 1,205 2,252 3,466 in installed base and 60% in App sales QoQ. Further, BK’s foray into own
Margin (%) 3.0 11.7 15.5 18.2
PAT (Rs. m) (1,662) (665) (100) 544
delivery has picked up steam with the company acquiring 100 E-scooters.
EPS (Rs.) (4.3) (1.7) (0.3) 1.4
Gr. (%) 66.9 (60.0) (84.9) (642.8) We believe Burger chains as a whole are well placed for strong growth given
DPS (Rs.) - - - - 1) Closure of ~25-30% eateries due to Pandemic 2) Increased consumer focus
Yield (%) - - - -
RoE (%) (35.0) (10.4) (1.7) 8.7 towards health and hygiene measures and 3) Low penetration. We expect
RoCE (%) (19.6) (1.8) 11.1 24.0 Burger king to capitalize on emerging growth opportunities on account of
EV/Sales (x) 11.9 5.9 4.2 3.3
strong competitive advantage like 1) Sharp focus on store opening with target
EV/EBITDA (x) 392.8 50.2 27.2 17.9
PE (x) (37.5) (93.7) (621.2) 114.4 of 320 stores by FY22 and 700 by CY26 (274 as on 2QFY22), 2) Acceptance of
P/BV (x) 9.2 10.3 10.5 9.6 Stunner Menu which will drive volumes and focus on Whooper to improve
premiumzation, 3) fixed royalty at 5% 4) Renewed focus on the BK App
Key Data BURG.BO | BURGERKI IN resulting in 1.5+mn download 6) Launch of BK café to help improve margins
52-W High / Low Rs.219 / Rs.108 and snacking options. We have cut our FY22/23/24 EPS estimates on account
Sensex / Nifty 60,687 / 18,103
Market Cap Rs.62bn/ $ 839m
of lower than expected margins however we remain confident on the long
Shares Outstanding 384m term story. We expect PAT breakeven by FY24 and strong profit growth post
3M Av g. Daily Value Rs.658.1m
FY25. Maintain Buy with DCF based target price of Rs242 (ex Indonesia).

Shareholding Pattern (%)

2Q ADS Recovery at 95% of FY20 ADS Revenues grew 2.5x YoY to Rs2.5bn
Promoter’s 52.62
Foreign 16.63 (PLe: Rs2.4bn). Gross margins at 65.4% (PLe: 65.6%) up 120bps YoY. EBIDTA at
Domestic Institution 5.22
Rs 256mn (PLe: Rs351n) vs Rs 3mn in 2Q21. Margins expanded 10 ppt to 10.4%.
Public & Others 25.53
Promoter Pledge (Rs bn) - (PLe: 14.5%). Restaurant EBITDA at Rs 407.7 Mn; 16.6% for 2Q22 vs Rs 160.7
Mn; 10.7% in 1Q22. Loss at Rs202mn (PLe: Rs132mn) vs Rs 377mn in 2Q21.
Stock Performance (%)
1M 6M 12M Concall Takeaways: 1) With malls opening, dine-in will benefit. Expect Dine-in
Absolute 0.6 24.8 -
Relativ e (0.1) 0.2 - contributions to return to ~60-65% 2) Delivery continues to grow despite Dine in
improving with Delivery ADS improving from 157% in 1Q to 165% in 2Q22. 3) Soft
Amnish Aggarw al launched 1st BK café. 3 models for Café namely A/B/C. Model A costs Rs 2.5mn
amnishaggarwal@plindia.com | 91-22-66322233 (Other models not yet launched) 4) Acquisition of BK Indonesia to be completed by
Heet Vora FY22 end with fund raising through QIP or preferential allotment. 5) Menu being
heetvora@plindia.com | 91-22-66322381 upgraded to delivery friendly products on account continued delivery momentum.
6)App Sales grew 60% QoQ with 50% growth in installs. 7) Current Rent/Revenue
at 14%, expect the sam e to reduce by 200bps over 12-24 months on account of
leverage.

November 12, 2021 1

 Burger King India

Exhibit 1 : Q2FY22 Results- Net sales up 4x, SSSG 120%

Consolidated Q1FY22 Q1FY21 YoY gr. (%) Q4FY21 FY21 FY20 YoY gr. (%)
Net Sales 2,454 967 153.7 1,497 3,951 1,352 192.2
Gross Profit 1,605 620 158.7 976 2,581 860 200.0
% of NS 65.4 64.2 1.2 65.3 65.3 63.6 1.7
EBITDA 256 3 7,973.2 15 271 (287) (194.4)
Margins % 10.4 0.3 10.1 6.9 6.9 (21.3) 28.1
Depreciation 334 309 8.2 329 662 621 6.6
Interest 167 211 167 334 424
Other Income 43 139 (69.3) 37 80 164 (51.6)
PBT (202) (377) (46.4) (444) (646) (1,168) (44.7)
Tax - - - - -
Tax rate % 0.0 0.0 - 0.0 0.0 0.0 -
Adjusted PAT (202) (377) (46.4) (444) (646) (1,168) (44.7)
Source: Company, PL

Exhibit 2 : Delivery Sales at 52% during Oct’21

Delivery Dine-in

100%
90%
28%
80%
47% 52%
70% 60%
60%
50%
40%
72%
30%
53% 48%
20% 40%
10%
0%
Q4FY21 Q1FY22 2QFY22 Oct-21

Source: Company, PL

Exhibit 3 : Total store count at 274 in Q2FY22 and to reach 470 by FY24

Source: PL, Company

November 12, 2021 2

 Burger King India

Exhibit 4 : 95% ADS recovery in 2QFY22. Oct’21 ADS at 101%

Source: PL, Company

Exhibit 5 : Region wise ADS recovery on FY20 baseline

Source: Company, PL

November 12, 2021 3

 Burger King India

Exhibit 6 : 75 BK Café by FY23

Source: Company, PL

November 12, 2021 4

 Burger King India

Financials
Incom e Statement (Rs m ) Balance Sheet Abstract (Rs m )
Y/e Mar FY21 FY22E FY23E FY24E Y/e Mar FY21 FY22E FY23E FY24E

Net Revenues 4,945 10,341 14,506 19,010 Non-Current Assets

YoY gr. (%) (41.2) 109.1 40.3 31.0
Cost of Goods Sold 1,756 3,566 4,860 6,178 Gross Block 14,178 16,978 20,668 25,284
Gross Prof it 3,188 6,775 9,647 12,832 Tangibles 13,845 16,612 20,266 24,842

Margin (%) 64.5 65.5 66.5 67.5 Intangibles 332 366 402 443
Employ ee Cost 1,176 1,734 2,297 2,948
Other Expenses 191 516 724 949 Acc: Dep / Amortization 4,322 5,644 7,230 9,198
Tangibles 4,255 5,554 7,117 9,058

EBITDA 150 1,205 2,252 3,466 Intangibles 67 89 113 140

YoY gr. (%) (85.6) 704.3 86.8 53.9

Margin (%) 3.0 11.7 15.5 18.2 Net fixed assets 9,856 11,334 13,438 16,087
Tangibles 9,591 11,058 13,149 15,784
Depreciation and Amortization 1,275 1,322 1,586 1,967 Intangibles 265 277 289 303

EBIT (1,126) (116) 666 1,498 Capital Work In Progress 301 350 400 560
Margin (%) (22.8) (1.1) 4.6 7.9 Goodwill - - - -
Non-Current Inv estments 290 352 429 518

Net Interest 821 733 850 982 Net Def erred tax assets - - - -

Other Income 285 184 84 28 Other Non-Current Assets 39 61 69 71

Profit Before Tax (1,662) (665) (100) 544 Current Assets

Margin (%) (33.6) (6.4) (0.7) 2.9 Inv estments 1,243 - - -
Inv entories 100 137 146 186
Total Tax - - - - Trade receiv ables 60 85 119 156

Effective tax rate (%) - - - - Cash & Bank Balance 2,161 1,748 1,044 395
Other Current Assets 163 237 319 399

Profit after tax (1,662) (665) (100) 544 Total Assets 14,282 14,383 16,051 18,466
Minority interest - - - -
Share Prof it f rom Associate - - - - Equity
Equity Share Capital 3,830 3,830 3,830 3,830

Adjusted PAT (1,662) (665) (100) 544 Other Equity 2,905 2,214 2,124 2,678

YoY gr. (%) 130.1 (60.0) (84.9) (642.8) Total Networth 6,735 6,044 5,954 6,508
Margin (%) (33.6) (6.4) (0.7) 2.9
Extra Ord. Income / (Exp) (77) - - - Non-Current Liabilities
Long Term borrowings - - - -

Reported PAT (1,739) (665) (100) 544 Prov isions 209 209 209 209

YoY gr. (%) 127.1 (61.8) (84.9) (642.8) Other non current liabilities 8 9 10 11

Margin (%) (35.2) (6.4) (0.7) 2.9

Current Liabilities
Other Comprehensiv e Income 1 - - - ST Debt / Current of LT Debt - - - -

Total Comprehensiv e Income (1,738) (665) (100) 544 Trade pay ables 1,140 846 1,339 1,739

Equity Shares O/s (m) 383 383 383 383 Other current liabilities 596 744 882 1,062

EPS (Rs) (4.3) (1.7) (0.3) 1.4 Total Equity & Liabilities 14,282 14,382 16,051 18,466
Source: Company Data, PL Research Source: Company Data, PL Research

November 12, 2021 5

 Burger King India

Cash Flow (Rs m) Key Financial Metrics

Y/e Mar FY21 FY22E FY23E FY24E Year
Y/e Mar FY21 FY22E FY23E FY24E
PBT (1,662) (665) (100) 544 Per Share(Rs)
Add. Depreciation 1,275 1,322 1,586 1,967 EPS (4.3) (1.7) (0.3) 1.4
Add. Interest 821 733 850 982 CEPS (1.0) 1.7 3.9 6.6

Less Financial Other Income 285 184 84 28 BVPS 17.6 15.8 15.5 17.0
Add. Other (48) (22) (7) (1) FCF 0.3 (4.6) (2.4) (2.3)

Op. prof it bef ore WC changes 386 1,368 2,329 3,492 DPS - - - -

Net Changes-WC 298 (290) 498 415 Return Ratio(%)

Direct tax - - - - RoCE (19.6) (1.8) 11.1 24.0

Net cash from Op. activities 685 1,078 2,827 3,907 ROIC (10.3) (0.9) 4.4 8.3
Capital expenditures (589) (2,850) (3,741) (4,776) RoE (35.0) (10.4) (1.7) 8.7
Interest / Div idend Income - - - - Balance Sheet
Others (1,056) 1,181 (77) (88) Net Debt : Equity (x) (0.5) (0.3) (0.2) (0.1)

Net Cash from Invt. activities (1,645) (1,669) (3,818) (4,864) Net Working Capital (Day s) (72) (22) (27) (27)
Issue of share cap. / premium 5,719 (26) 10 10 Valuation(x)
Debt changes (2,057) 936 1,127 1,280 PER (37.5) (93.7) (621.2) 114.4

Div idend paid - - - - P/B 9.2 10.3 10.5 9.6

Interest paid (821) (733) (850) (982) P/CEPS (161.1) 94.8 41.9 24.8

Others (1) 1 (1) - EV/EBITDA 392.8 50.2 27.2 17.9

Net cash from Fin. activities 2,840 178 287 308 EV/Sales 11.9 5.9 4.2 3.3
Net change in cash 1,880 (412) (704) (649) Div idend Y ield (%) - - - -
Free Cash Flow 96 (1,771) (914) (869) Source: Company Data, PL Research
Source: Company Data, PL Research

Quarterly Financials (Rs m)

Y/e Mar Q3FY21 Q4FY21 Q1FY22 Q2FY22

Net Revenue 1,632 1,961 1,497 2,454

YoY gr. (%) (28.4) - 288.9 153.7
Raw Material Expenses 589 675 521 849
Gross Prof it 1,042 1,285 976 1,605
Margin (%) 63.9 65.6 65.2 65.4
EBITDA 152 245 15 256
YoY gr. (%) (41.7) - (105.3) 7,973.2
Margin (%) 9.3 12.5 1.0 10.4
Depreciation / Depletion 335 319 329 334
EBIT (183) (74) (313) (78)
Margin (%) (11.2) (3.8) (20.9) (3.2)
Net Interest 234 163 167 167
Other Income 127 34 37 43
Profit before Tax (290) (204) (444) (202)
Margin (%) (17.8) (10.4) (29.6) (8.2)
Total Tax - - - -
Effective tax rate (%) - - - -
Profit after Tax (290) (204) (444) (202)
Minority interest - - - -
Share Prof it f rom Associates - - - -
Adjusted PAT (290) (204) (444) (202)
YoY gr. (%) 33.6 - (43.9) (46.4)
Margin (%) (17.8) (10.4) (29.6) (8.2)
Extra Ord. Income / (Exp) - (56) - -

Reported PAT (290) (259) (444) (202)

YoY gr. (%) 33.6 - (44.9) (47.5)
Margin (%) (17.8) (13.2) (29.6) (8.2)
Other Comprehensiv e Income (3) 4 - -
Total Comprehensive Income (293) (255) (443) (202)
Av g. Shares O/s (m) - - - -

EPS (Rs) - - - -
Source: Company Data, PL Research

November 12, 2021 6

 Burger King India

Price Chart Recommendation History

(Rs)
No. Date Rating TP (Rs.) Share Price (Rs.)
200
1 6-Oct-21 BUY 251 159

165 2 28-Aug-21 BUY 250 172

3 16-Aug-21 BUY 250 168
130
4 5-Jul-21 BUY 250 158
95 5 27-May-21 BUY 250 152
6 25-Feb-21 BUY 221 145
60
May - 21

Sep - 21

Nov - 21
Dec - 20

Jul - 21
Apr - 21
Feb - 21

Analyst Coverage Universe

Sr. No. Com pany Nam e Rating TP (Rs) Share Price (Rs)
1 Asian Paints BUY 3,675 3,002
2 Avenue Supermarts Accumulate 5,359 5,324
3 Bajaj Electricals Hold 1,246 1,284
4 Britannia Industries Accumulate 4,093 3,622
5 Burger King India BUY 251 159
6 Colgate Palmolive Accumulate 1,852 1,532
7 Crompton Greaves Consumer Electricals BUY 530 451
8 Dabur India Accumulate 647 598
9 Emami Accumulate 624 536
10 Havells India Accumulate 1,400 1,286
11 Hindustan Unilever Accumulate 2,930 2,547
12 ITC BUY 270 238
13 Jubilant FoodWorks Accumulate 4,111 3,965
14 Kansai Nerolac Paints Accumulate 651 560
15 Marico Hold 544 564
16 Mold-tek Packaging BUY 725 669
17 Nestle India Accumulate 19,501 18,965
18 Pidilite Industries Hold 2,491 2,474
19 Titan Company BUY 2,651 2,460
20 Voltas Hold 1,200 1,245
21 Westlife Development Accumulate 603 574

PL’s Recommendation Nomenclature (Absolute Performance)

Buy : > 15%
Accumulate : 5% to 15%
Hold : +5% to -5%
Reduce : -5% to -15%
Sell : < -15%
Not Rated (NR) : No specific call on the stock
Under Review (UR) : Rating likely to change shortly

November 12, 2021 7

 Burger King India

ANALYST CERTIFICATION
(Indian Clients)
We/I, Mr. Amnish Aggarwal- MBA, CFA, Mr. Heet Vora- CA Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this
research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to
the specific recommendation(s) or view(s) in this report.

(US Clients)
The research analy sts, with respect to each issuer and its securities covered by them in this research report, certify that: All of the views expressed in this research report accurately
ref lect his or her or their personal views about all of the issuers and their securities; and No part of his or her or their compensation was, is or will be directly related to the specific
recommendation or views expressed in this research report.

DISCLAIMER
Indian Clients
Prabhudas Lilladher Pvt. Ltd, Mumbai, India (hereinafter referred to as “PL”) is engaged in the business of Stock Broking, Portfolio Manager, Depository Participant and distribution for
third party financial products. PL is a subsidiary of Prabhudas Lilladher Advisory Services Pvt Ltd. which has its various su bsidiaries engaged in business of commodity broking,
inv estment banking, financial services (margin funding) and distribution of third party financial/other products, details in respect of which are available at www.plindia.com.
This document has been prepared by the Research Division of PL and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported
or copied or made available to others without prior permission of PL. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security.
The inf ormation contained in this report has been obtained from sources that are considered to be reliable. However, PL has not independently verified the accuracy or completeness
of the same. Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made
av ailable or expressed herein or for any omission therein.
Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or
otherwise of any investments will depend upon the recipient's particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor.
Either PL or its affiliates or its directors or its employees or its representatives or its clients or their relatives may have position(s), make market, act as principal or engage in transactions
of securities of companies referred to in this report and they may have used the research material prior to publication.
PL may from time to time solicit or perform investment banking or other services for any company mentioned in this document.
PL is in the process of applying for certificate of registration as Research Analyst under Securities and Exchange Board of India (Research Analysts) Regulations, 2014
PL submits that no material disciplinary action has been taken on us by any Regulatory Authority impacting Equity Research Analysis activities.
PL or its research analysts or its associates or his relatives do not have any financial interest in the subject company.
PL or its research analysts or its associates or his relatives do not have actual/beneficial ownership of one per cent or more securities of the subject company at the end of the month
immediately preceding the date of publication of the research report.
PL or its research analysts or its associates or his relatives do not have any material conflict of interest at the time of publication of the research report.
PL or its associates might have received compensation from the subject company in the past twelve months.
PL or its associates might have managed or co-managed public offering of securities for the subject company in the past twelve months or mandated by the subject company for any
other assignment in the past twelve months.
PL or its associates might have received any compensation for investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
PL or its associates might have received any compensation for products or services other than investment banking or merchant banking or b rokerage services from the subject
company in the past twelve months
PL or its associates might have received any compensation or other benefits from the subject company or third party in connection with the research report.
PL encourages independence in research report preparation and strives to minimize conflict in preparation of research report. PL or its analysts did not receive any compensation or
other benef its from the subject Company or third party in connection with the preparation of the research report. PL or its Research Analysts do not have any material conflict of interest
at the time of publication of this report.
It is confirmed that Mr. Amnish Aggarwal- MBA, CFA, Mr. Heet Vora- CA Research Analysts of this report have not received any compensation from the companies mentioned in the
report in the preceding twelve months
Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions.
The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its
or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report.
The research analysts for this report has not served as an officer, director or employee of the subject company PL or its research analysts have not engaged in market making activity
f or the subject company
Our sales people, traders, and other professionals or affiliates may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary
to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed
herein. In rev iewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest.
PL and its associates, their directors and employees may (a) from time to time, have a long or short position in, and buy or sell the securities of the subject company or (b) be engaged
in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the f inancial instruments of the subject company or act as an
adv isor or lender/borrower to the subject company or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.

US Clients
This research report is a product of Prabhudas Lilladher Pvt. Ltd., which is the employer of the research analyst(s) who has prepared the research report. The research analyst(s)
preparing the research report is/are resident outside the United States (U.S.) and are not associated persons of any U.S. regulated broker-dealer and therefore the analyst(s) is/are
not subject to supervision by a U.S. broker-dealer, and is/are not required to satisfy the regulatory licensing requirements of FINRA or required to otherwise comply wit h U.S. rules or
regulations regarding, among other things, communications with a subject company, public appearances and trading securities held by a research analyst account.
This report is intended for distribution by Prabhudas Lilladher Pvt. Ltd. only to "Major Institutional Investors" as defined by Rule 15a-6(b)(4) of the U.S. Securities and Exchange Act,
1934 (the Exchange Act) and interpretations thereof by U.S. Securities and Exchange Commission (SEC) in reliance on Rule 15a 6(a)(2). If the recipient of this report is not a Major
Institutional Investor as specified above, then it should not act upon this report and return the same to the sender. Further, this report may not be copied, duplicated and/or transmitted
onward to any U.S. person, which is not the Major Institutional Investor.
In reliance on the exemption from registration provided by Rule 15a-6 of the Exchange Act and interpretations thereof by the SEC in order to conduct certain business with Major
Institutional Investors, Prabhudas Lilladher Pvt. Ltd. has entered into an agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo").
Transactions in securities discussed in this research report should be effected through Marco Polo or another U.S. registered broker dealer.

Prabhudas Lilladher Pvt. Ltd.

3rd Floor, Sadhana House, 570, P. B. Marg, Worli, Mumbai-400 018, India | Tel: (91 22) 6632 2222 Fax: (91 22) 6632 2209
w ww.plindia.com

November 12, 2021 Digitally signed by AMNISH AGGARWAL

DN: c=IN, o=Prabhudas Lilladher Private Limited, 8
AMNISH AGGARWAL ou=Management, postalCode=400018, st=MAHARASHTRA,
serialNumber=7a6f13691881d5a8af6353865a61b48b7040e72f4a
1bf53182e368b3ca14a5e4, cn=AMNISH AGGARWAL
Date: 2021.11.12 21:23:30 +05'30'