- You could capture up to 25% upside if the stock sustains its recent rally.
- Jefferies’ Buy rating signals a turning point after a 17% price correction.
- Management transition to CFO‑turned‑CEO may tighten execution and drive margins.
- KFC shows margin resilience; Pizza Hut remains the weak link.
- Store‑count expansion continues, but selective closures hint at a quality‑over‑quantity strategy.
You missed the last Devyani rally, and you’ll regret ignoring this one.
Why Jefferies’ Upgrade of Devyani International Matters
Jefferies moved from Hold to Buy after the stock fell 17% from its recent peak, positioning a target price of Rs 145. At the current Rs 132.88 level that translates to roughly 25% upside. The upgrade is not a blind endorsement; analysts stress that the price correction has created a risk‑reward imbalance that favors long‑biased investors.
Devyani International Q3 Numbers: The Data Behind the Surge
Consolidated revenue grew just over 10% YoY, slightly missing Jefferies’ internal forecasts but still indicating top‑line momentum. Same‑store sales growth (SSSG) – a key metric that isolates performance of existing outlets – painted a mixed picture: KFC India improved sequentially yet stayed negative at –2.9%, while Pizza Hut India plunged 9.1%.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) rose 3% YoY, beating consensus, and the pre‑exceptional PAT (Profit After Tax) also beat estimates. Gross margin expanded 20 basis points (bps) YoY, reflecting modest cost‑control improvements.
However, Brand Contribution (BC) margin – the profitability after deducting franchise fees and royalties – fell 40 bps to 13.9% overall. The drop was sharper in India (‑80 bps) but offset by a 50 bps rise internationally.
Store‑Count Strategy: Adding 95 Net New Stores While Pruning Under‑Performers
Devyani closed 13 lagging franchise units (including Costa and Sanook) and opened 95 net new stores: 75 in India (54 KFC, 18 Pizza Hut, 17 own‑brand locations) and 20 abroad. The total footprint now stands at 2,279 locations as of Dec 2025. This selective expansion signals confidence in the KFC franchise while acknowledging Pizza Hut’s structural challenges.
KFC India: Margin Expansion Offsets Sales Softness
Average Daily Sales (ADS) rose QoQ to ₹90,000 but remain down YoY. Revenue grew 6% YoY, driven by a 13% YoY jump in delivery volumes, even as the dine‑in share slipped to 55%. Gross margin climbed 115 bps to 69.8% thanks to lower input taxes and operational efficiencies. BC margin slipped 40 bps to 16.8% but improved 2.5 percentage points YoY, indicating better franchise economics.
Pizza Hut India: The Weakest Link in the Portfolio
Pizza Hut’s SSSG deteriorated to –9.1%, marking one of its toughest quarters. Revenue fell 6% YoY, with delivery down 10% and dine‑in down 2%. While gross margin edged up QoQ, BC margin fell sharply 130 bps to 13.0%, underscoring a profitability squeeze.
Other Brands & International Business: Emerging Bright Spots
Franchised non‑core brands (Vaango, BBK, Goila) posted 9% revenue growth and modest margin improvement. International operations expanded 10% YoY, with BC margin rising to 17.1%, hinting at scalable profit engines outside India.
Leadership Transition: From CFO to CEO – What It Means for Execution
Current CEO Virag Joshi will retire on 31 Mar 2026, staying on as a non‑executive director. CFO Manish Dawar will take the helm on 1 Apr 2026. Jefferies views the move as a continuity play, giving Dawar time to reassess the portfolio and drive “sustainable growth.” The transition coincides with a positive start to Jan 2026 across all brands except Pizza Hut, suggesting early momentum under the new leadership.
Sector Context: How Devyani Stacks Up Against Peers
Within the Indian quick‑service restaurant (QSR) space, Tata Consumer and Adani’s food‑service arms have been focusing on high‑margin formats and aggressive digital ordering. Devyani’s mixed performance mirrors the broader industry trend: legacy Western brands (KFC, Pizza Hut) face headwinds from rising labour costs and price‑sensitive consumers, while home‑grown concepts (Vaango, BBK) capture local palate preferences. The company’s ability to grow internationally also provides a hedge against domestic saturation.
Historical Lens: What Past Upgrades Tell Us
When Jefferies upgraded Devyani in mid‑2022 after a similar 15% price dip, the stock rallied 12% over the next three months before retracing modestly. The key differentiator this time is the clearer path to margin expansion via store rationalisation and leadership change, reducing the risk of a repeat sell‑off.
Investor Playbook: Bull vs. Bear Cases
Bull Case: The 25% upside target is achievable if KFC continues margin expansion, Pizza Hut closures stabilize profitability, and the new CEO accelerates cost efficiencies. International growth and higher BC margins abroad add a multi‑currency tailwind.
Bear Case: Persistent weakness at Pizza Hut could erode overall profitability, and any misstep in the leadership transition may stall execution. A slowdown in consumer discretionary spending could also pressure top‑line growth, especially in Tier‑2 and Tier‑3 cities.
Bottom line: The Jefferies upgrade creates a compelling entry point for investors comfortable with a short‑term “quality‑over‑quantity” play and who believe the new CEO can unlock the upside embedded in the current valuation.