Sapphire Foods reported its best quarterly performance since the post-Covid period, driven by a 26% revenue surge in KFC India. While consolidated EBITDA rose 21%, investors should watch margin pressure in the Pizza Hut segment and Sri Lankan operations.
Sapphire Foods Reports Strong Q2 FY27 Revenue Growth
Restaurant sales grew 20% YoY to Rs 8,853 Mn, while adjusted EBITDA surged 39% to Rs 624 Mn.
Reader Takeaway: KFC India’s record growth boosts overall performance, but persistent margin headwinds in Pizza Hut demand investor caution.
What just happened
Sapphire Foods India released its Q2 FY27 results, marking its strongest quarter of revenue and adjusted EBITDA growth in 16 quarters. The company reported a 20% increase in restaurant sales, fueled by a robust performance in the KFC India segment. Consolidated EBITDA grew by 21% to Rs 1,286 Mn, with margins holding steady at 14.5%.
Why this matters
The results highlight the efficacy of the company’s "everyday value" strategy. KFC India achieved 14% same-store sales growth (SSSG), proving that consumer demand remains resilient when supported by targeted value propositions like the Rs 99 Krisper Burger Meal. The 70 bps margin expansion in the KFC segment, despite inflationary pressures, underscores strong operational efficiency.
Segment Performance
- KFC India: The standout performer, achieving 26% revenue growth. Digital adoption remains a core focus, with kiosks now in over 80% of locations.
- Pizza Hut India: While revenue grew 7% and SSSG hit 5%—the highest in seven quarters—the segment struggled with profitability. EBITDA margin dipped to negative 2.8%, down 100 bps, largely due to rising energy costs.
- Sri Lanka: The region remains a challenge, with EBITDA margins contracting by 290 bps to 12.5% due to persistent inflationary pressures impacting wages and energy.
Operational Update
Sapphire Foods expanded its footprint significantly, adding 12 net restaurants during the quarter. The total restaurant count reached 1,086 as of September 30, 2026. The company continues to prioritize digital infrastructure, recording over 75 million app downloads to date.
Risks to watch
Investors should monitor the ongoing margin pressure at Pizza Hut. The negative EBITDA margin suggests difficulty in balancing promotional pricing with rising input costs. Additionally, the macroeconomic environment in Sri Lanka continues to be a drag on consolidated profitability.
What to track next
Watch for management’s commentary on cost-control measures for Pizza Hut and any potential recovery signs in the Sri Lankan market during the upcoming festive and post-festive quarters.