Devyani International Stock: Emkay Global Says Buy, Sets Rs 190 Target

CONSUMER-PRODUCTS

Overview

Emkay Global Financial reiterated a 'Buy' rating on Devyani International (DIL), setting a target price of Rs 190. The brokerage cited a favorable agreement with Yum!, potential merger synergies, and planned growth investments. While near-term earnings were cut, cost waivers and relaxed store targets are expected to revive the PH brand.

Analyst Call Boosts Devyani International

Emkay Global Financial maintained its positive stance on Devyani International Limited (DIL), issuing a 'Buy' recommendation with a price target of Rs 190. The firm's analysts noted an investor call where DIL's management detailed a significant agreement with Yum! The deal includes substantial cost waivers and a phased transition of key operational functions for Pizza Hut (PH) and KFC. This strategic shift is expected to equip DIL with new technological and managerial capabilities.

Synergy Benefits and Brand Revival

The financial impact of these changes is projected to be substantial. Emkay estimates synergy benefits between ₹2.10 billion and ₹2.25 billion, with approximately 60% of these savings anticipated by FY28E and full realization by FY29E. Crucially, these synergy figures are calculated net of the required investments in new tech and leadership. Management believes relaxed store targets, combined with these cost waivers, will pave the way for a revival of the Pizza Hut brand.

Near-Term Adjustments and Long-Term Outlook

Despite the positive long-term outlook, Emkay Global trimmed its near-term earnings estimates for Devyani International by 7-9%, citing a sluggish demand environment. However, rolling over the valuation to December 2027E earnings keeps the target price at Rs 190, which represents 33 times EBITDA for the period. The brokerage's conviction in the stock's upside potential remains firm.

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