Please refer to important disclosures at the end of this report Equity Research June 05 , 2022 BSE Sensex: 55769 ICICI Securities Limited is the author and distributor of this report Sector update Consumer Staples & D iscretionary Menu comparison across top Quick Service Restauran ts Research Analysts: Manoj Menon manoj.menon@icicisecurities.com +91 22 680 7 7209 Aniket Sethi aniket.sethi @icicisecurities.com +91 22 680 7 7632 Karan Bhuwania karan.bhuwania@icicisecurities.com +91 22 680 7 7351 INDIA Why read this report: Our primary analysis of menu prices of international QSR b rands (in I ndia) to better understand the positioning (value vs premium). T he findings are a mix of quanti tative (actual prices) and qualitative (our interpretations): Pizza Hut / KFC are comparatively premium - positioned by ~5 - 10% / ~ 2 - 3 % within their segments vs Domino’s / Popeye’s which are value - positioned Within burger chains , we found that Burger King i s cheaper by ~8 - 10% than McDonald’s in the affordable segment, while Burger King is priced higher by ~20% to McDonald’s in the premium segment Domino’s / McDonald’s / KFC appear to have comparatively better I ndianised their menu compared to Pizza Hut / Bu rger King / Popeye’s We believe premium QSRs are better placed to implement price increase s with relatively lower adverse effects of p rice elasticity. We reckon Pizza Hut and KFC have attempted to maintain their (slightly) premium market positioning. We like Sapphire (given its better demographic profile in terms of GDP/income levels vs the other Yum! franchisee s ). We also like JUBI at the current stock price as most of the concerns appear to be price d in . We stay long - term believers in Westlife. However, we have n o investment opinion on Devyani ; we reckon Restaurant Brands India ( earlier: Burger King India ) is a cyclical recovery play. ( Link ). We note that a few QSRs have tiered pricing model (based on channel and location). We have compared prices of Mumbai location for burger and pizza QSRs and of Bangalore for fried chicken. Domino’s vs Piz za Hut : Comparison between Domino’s and Pizza Hut suggests that the latter is premium in the range of ~5 - 1 0 % depending on the toppings and continues to maintain its slightly premium positioning v s Domino’s. This premium is maintained despite JUBI’s price recent 5% price hike ( after a ~4 - 5% hike in Dec’ 21). Domino’s provides a wide range of topping s vs its peers with comparatively more indianised flavour s . Pizza Hut on the other hand has fewer variations but unique flavour with simple toppings. We note that Pizza Hut does offer better (local) deals on its Pizzas which (in some cases) offsets the price differential. Burger King India vs McDonald’s : Burger King India appears to be cheaper with its Stunner m enu range vs McDonald’s by ~8 - 10 % in the value segme nt. At the premium - end, McDonald’s is cheaper by ~ 20 % vs Burger King. McDonald’s also has a better offering on Indian regional flavour s ( Tikki Burger , Spicy Paneer and Maharaja , Spicy C hicken , Chicken Maharaja , Chicken Kebab etc. ). Innovation of g ourmet bu rgers by McDonald’s also appears to be well accepted by consumers. KFC vs Popeye’s : Popeye’s , launched with a few stores in B engaluru , appears to have a better pocket - friendly strategy , in our view It is chea per to KFC in the range of ~ 2 - 3 % , while its me nu has limited options currently compared to KFC , which caters to a wider variety of products. Consumer Staples & Di scretionary , June 05 , 2022 ICICI Securities 2 Domino’s vs Pi zza Hut Pricing and m en u c omparison Domino’s is a market leader in the segment and caters to a wide range of topping vs its peers with indianised flavour. The pricing is competitive considering the impact of inf lation. The comparison between regular and m e dium base of Domino’s vs Pizza Hut, suggests Domino’s is cheaper in the range of ~5 - 1 0 % depending on the toppings. Innovation with I ndianisation On the pizza spread, the competition is tough as experimentation of toppings is a continuous process w h ere the generic veggie pizza is common between the two followed by the traditional chicken flavo u r. The uniqueness is visible - Domino’s with more Indian regional flavour , which attempt s to rea ch consumers across all age group s (examples of Achari Do Pyaza , Kadhai Paneer etc. ). The different base size offering by Domino’s over Pizza Hut has its co mpetitive advantage with pocket - friendly pricing for millennials and their parents while hosting birthday parties and other events. While we compare Dominos (hand - tossed) with Pizza Hut (Pan) we note that, Dominos charges more for its Fresh Pan Pizza by INR30/INR40 on its Regular / Medium pizza. Table 1 : Domino’s vs Piz za Hut (hand - t ossed vs p an) (Rs) Regular Medium Regular Medium Comparison Dom inos Price* Pizza Hut Price* Margherita 109 239 Margherita 129 279 18% 17% Cheese & Corn 209 379 Corn & Cheese 179 359 - 14% - 5% Cheese & Tomato 209 379 Tandoori Onion 179 359 - 14% - 5% Double Cheese Margherita 209 379 Double Cheese 21 9 439 5% 16% Fresh Veggie 209 379 Veggie Feast 219 439 5% 16% Farmhouse 259 459 Country Feat 269 519 4% 13% Mexican Green Wave 259 459 Farmers Pick 269 519 4% 13% Veggie Paradise 259 459 Veggie Lover 269 519 4% 13% Paneer Makhani 299 549 Double Paneer Supreme 329 589 10% 7% Deluxe Veggie 299 549 Veg Exotica 329 589 10% 7% Veg Extravaganza 299 549 Veggie Supreme 329 589 10% 7% Indi Tandoori Paneer 299 549 Tandoori Paneer 269 519 - 10% - 5% Chicken Sausage 199 369 Ch icken Sausage 209 439 5% 19% Chicken Golden Delight 309 559 Chicken N Corn Delight 269 519 - 13% - 7% Chicken Fiesta 309 559 Chicken Pepper Crunch 329 589 6% 5% Chicken Pepperoni 359 599 Chicken Pepperoni 269 519 - 25% - 13% Chicken Dominator 359 599 Chicken Supreme 369 629 3% 5% Non - Veg Supreme 359 599 Triple Chicken Feast 369 629 3% 5% Indi Chicken Tikka 359 599 Chicken Tikka Supreme 369 629 3% 5% *Price as on May 02, 2022, Location – Mumbai #We have assumed hand - tossed pizza for Domino’s and pan pizza for Pizza Hut Source: Company data, I - Sec research Consumer Staples & Discretionary , June 05 , 2022 ICICI Securities 3 Burger King vs McDonalds Table 2 : McDonalds vs Burger King (price c omparison) McDonald's Price* (Rs) Burger King Price* (Rs) Comparison McAloo Tikki 49 Crispy Veg Burger 45 - 8% Mexican McAloo Tikki 56 Veg Makhani Burst 50 - 11% McVeggie 134 BK Classic Burger - Veg 99 - 26% McChicken 129 BK Classic Burger - Chicken 109 - 16% Masala McEgg Burger 56 King Egg 50 - 11% McSpicy Paneer 176 Paneer Royale Burger 209 19% McSpicy Chicken 176 Fiery Chicken Burger 209 19% Veg Maharaja Mac 205 Veg Whopper 169 - 18% Chicken Maharaja Mac 214 Chicken Whopper 199 - 7% Gourmet Burger Triple Cheese American Veg Burger 199 Hot N Cheesy Burger 209 5% McSpicy Premium Veg Burger 218 Indie Tikka Whopper 209 - 4% McSpicy Premium Chicken Burger 243 Indie Tikka Chicken Whopper 239 - 2% *Price as on May 02, 2022, Location - Mumbai Source: Company Data, I - Sec research Pricing and menu c omparison In the value s egment , B urger K ing appear s cheaper vs McDonald’s If we compare McAloo Tikki and McVeggie by McDonald’s with Crispy Veg Burger and BK Veg Classic Burger of Burger King, Burger King is cheaper by 8% and 26% The preference of varied veggie c ombination and the first mover advantage of McDonald’s have likely placed itself as a preferred choice for consumers At the premium end, McDonald’s is cheaper by ~19% vs Burger King (McSpicy paneer vs Paneer Royale Burger; McSpicy Chicken vs. Fiery Chicke n Burger). Localisation is key With both the chains having their bestselling burgers, we believe local culture and religious beliefs prevail and influence food habits in India McDonald’s has a touch on Indian regional flavour s with the launch of its Tikk i Burger, Spicy Paneer and Maharaja B urger on the veg and the Spicy C hicken, the C hicken M aharaja (a double patty) and its chicken kebab on the non - veg space with a tandoori twist On the other end, Burger King, has its fully loaded whooper with some india nised offering (Indie Tikka under the whooper range and a spicy burger either with paneer or chicken). Consumer Staples & Discretionary , June 05 , 2022 ICICI Securities 4 KFC vs Popeye’s Pricing and menu c omparison On the pricing front, Popeye’s and KFC are closely priced with the former cheaper in the range of ~2 - 3%. As of now Popeye’s offers a limited menu as compared to KFC. While on the Rice Bowl comparison, Popeye’s is cheaper by 19% on chicken rice and 6% cheaper on veg rice. Table 3 : KFC vs Popeye’s (price comparison) KFC Price* (Rs) Popeye’ s Price* (Rs) Comparison Chicken Buckets 2pc Smoky Red Chicken 195 Lemon Chili Grilled Chicken (2 pc) 189 - 3% 4 pc Hot & Crispy Chicken 399 Popeye’s Signature Chicken - Classic (4 pc) 389 - 3% 2 Pc Hot & Crispy Chicken 195 Popeye’s Signature Ch icken - Classic (2 pc) 199 2% Burger Classic Zinger Burger 179 Classic Chicken Sandwich 179 0% Veg Zinger Burger 169 Cajun Veg Burger 159 - 6% Rice Buckets Grilled Chicken Biryani Bucket 209 Spicy Chicken Rice with Grilled Chicken 1 69 - 19% Veg Biryani Bucket 169 Spicy Veg Rice with Cajun Veg Popcorn 159 - 6% *Price as on May 02, 2022 (Excl: GST), Location - Bangalore Source: Company Data, I - Sec research Consumer Staples & Discretionary , June 05 , 2022 ICICI Securities 5 Valuation and risks: We value stocks in our coverage universe on DCF (WACC and TG ranging from 10 - 13%, 3 - 6% respectively) except Godrej Consumer and Tata Consumer, which we value on SoTP basis. Key upside risk is: better - than - expected gross margins due to correction in input prices. Key downside risk is unexpected irrational comp etition due to deceleration in general consumption demand. Please refer table 4 for target prices and ratings Table 4 : Valuation summary (QSR) Company CMP TP Rating PE (x) EV/EBITDA (x) ADTV Market cap. EV/ sales (x) (Rs) (Rs) FY23E FY24E FY23E FY24E (US$ mn) (Rs bn) (US$ bn) FY23E FY24E Restaurant Brands Asia ( Burger King India ) 105 125 ADD NM 129 36 23 3.8 52 0.7 2.7 2.1 Jubilant Foodworks 543 720 BUY 61 44 38 29 47.4 359 4.6 6.7 5.4 Sapphire Foods 998 1,700 BUY 57 3 4 13 10 2.3 64 0.8 2.8 2.1 Westlife Development 461 600 BUY 77 50 36 26 1.2 72 0.9 3.6 3.0 Company P/B (x) P/CEPS (x) RoE (%) RoCE (%) CAGR (FY22 - 24E) (%) FY23E FY24E FY23E FY24E FY23E FY24E FY23E FY24E Revenues EBITDA PAT Restaurant Brands Asia ( Bur ger King India ) 7 6 24 17 (0) 5 5 9 36 222 NM Jubilant Foodworks 12 10 35 28 24 25 20 21 22 29 38 Sapphire Foods 6 5 16 12 10 15 16 23 32 46 99 Westlife Development 13 10 30 23 18 23 27 34 24 89 353 Source: Company Data, I - Sec Research Price charts Re staurant Brands Asia ( Burger King India ) Jubilant Foodworks Sapphire Foods Westlife Development 50 100 150 200 250 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 (Rs) 200 400 600 800 1,000 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 (Rs) 900 1,000 1,100 1,200 1,300 1,400 1,500 1,600 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 (Rs) 100 200 300 400 500 600 700 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 (Rs) Source: Bloomberg Consumer Staples & Discretionary , June 05 , 2022 ICICI Securities 6 In case of industry/sector reports or a report containing multiple stocks, the rating/recommendation for a particular stock m ay be based on the last released stock specific report for that company.” This report may be di stributed in Singapore by ICICI Securities, Inc. 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