Burger King shares triple IPO price in 7 months, Motilal Oswal expects 26% jump in one year
Burger King shares rose to 5 per cent in intraday on July 19. Whereas on July 20 at 10.10 am, it was trading 1.57 percent higher at Rs 181.05. In December last year, Burger King’s shares were listed at Rs 108.40. Since then, Burger King’s shares have gained 63 percent. The issue price of Burger King’s shares was Rs 60 and so far it has risen 195 per cent from its issue price.
Research and brokerage firm Motilal Oswal Financial Services has started the coverage of this quick-service restaurant with a Buy Rating. Motilal Oswal expects Burger King’s stock to rise 26 percent in the next year.
The brokerage firm believes that Burger King is a good investment in the quick-service restaurant segment. The Indian Food Service Industry (FSI) is expected to grow at a CAGR of 9% in the coming year.
Quick Service Restaurant is expected to grow at a CAGR of 19% from the Fiscal Year 2020 to Fiscal Year 2025 due to affordable product quality, good branding, convenience, profitability and technological convenience.
Motilal Oswal Financial Services expects companies like Burger King, Westlife Development and Jubilant Foodworks to benefit from the changed environment after the coronavirus infection.
The brokerage firm believes that Jubilant Foodworks will continue to be the most profitable and strong player in the next few years. Taking a three-year outlook, Motilal Oswal has set a target price of Rs 365 per share for Jubilant Foodworks. Whereas Burger King has predicted a rally of 166 percent.
The brokerage firm expects Burger King’s network to grow to 700 by December 2026 from 265 currently. Burger King is expanding its network faster than Jubilant Foods. The network expansion of Westlife Development and Jubilant Foodworks is around 8-10 per cent every year.
Burger King’s royalty is only 5 percent till 2039, compared to Jubilant Foodworks and Westlife Development’s royalty. Jubilant FoodWorks has the lowest royalties of 3 percent but its current royalties on both KFC and Pizza Hut are 6.3 per cent.