On Tuesday, BofA Securities revised its price target for Sapphire Foods India Ltd (SAPPHIRE:IN) shares, reducing it to INR 325.00 from INR 330.00, while retaining an Underperform rating on the stock. The adjustment follows Sapphire Foods' report of a disappointing quarter, which was influenced by a downturn in the Indian Quick Service Restaurant (QSR) sector.
The company's second-quarter results fell short of analyst expectations, primarily due to a significant 8% year-over-year decline in KFC's same-store sales. Management attributed the steeper than expected drop to an unusually negative impact during the festive vegetarian period in the second quarter, as well as potential brand challenges stemming from geopolitical tensions in the Middle East.
Additionally, the average daily sales (ADS) for KFC dropped to Rs 111k, marking the lowest point in the past four years. This decline in sales volume has led to a contraction in margins due to the considerable leverage effect. Pizza Hut's performance also remained subdued with same-store sales (SSS) decreasing by 3% year-over-year, despite a low comparison base of a 20% decline in the second quarter of the previous fiscal year.
From a broader financial perspective, Sapphire Foods' consolidated revenue increased by 8%, while EBITDA saw a 3% year-over-year decline in the second quarter. Both key financial metrics did not meet the estimates. The company also reported a net loss of Rs 30 million for the quarter, which included an impairment charge related to the closure of four stores in the Maldives due to a significant 60% decline in business year-over-year.
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