Emkay Global has maintained its 'Buy' rating on Devyani International with a price target of Rs 160, following the company’s recent earnings turnaround and regulatory approval for its merger with Sapphire Foods. The stock is being watched for its ongoing store expansion and potential synergies, though analysts note pressure from soft consumer demand and rising input costs.
Emkay Global Financial has maintained its 'Buy' rating on Devyani International, setting a price target of Rs 160. This assessment comes as the company navigates a changing quick-service restaurant landscape, marked by a recent earnings turnaround and a major regulatory milestone regarding its merger with Sapphire Foods.
In the second quarter of fiscal year 2027, Devyani International reported a consolidated revenue of Rs 1,519 crore, reflecting a roughly 10% increase compared to the previous year. Crucially, the company posted a net profit of Rs 3.46 crore, reversing the loss of Rs 23.95 crore recorded in the same quarter last year. This operational improvement was supported by healthy EBITDA growth, largely driven by the company’s Costa Coffee business and its international brand portfolio.
Merger and Expansion Strategy
A significant development for shareholders is the recent Competition Commission of India approval for the merger of Sapphire Foods India into Devyani International, which was cleared in late October 2026. Investors are closely tracking this integration, as it aims to create a larger entity with potentially higher operational efficiencies. The company continues to push ahead with its physical growth, having added 70 net new stores in the second quarter. Management has reiterated its full-year guidance, targeting the addition of 200 to 220 new outlets.
Sector Headwinds and Risks
Despite the positive earnings momentum, the brokerage and the broader market remain mindful of sector-wide pressures. The quick-service restaurant industry is currently dealing with a noticeable slowdown in consumer discretionary spending, which has affected demand across the sector. Additionally, the flagship KFC brand faces margin pressure due to persistent raw material and wage inflation. Analysts are also observing the recovery pace of the Pizza Hut brand, which has struggled in recent periods.
Going forward, the key monitorable for investors is how the company executes the post-merger integration of Sapphire Foods while managing the prevailing macroeconomic volatility. The final benefit of the merger will depend on the company's ability to drive cost efficiencies and maintain profitability levels in an environment where consumers are spending more cautiously.