Sapphire Foods slips 9%; management expects sales, margins woes to persist

However, in the long-term quick-service restaurant (QSR) drivers remain strong, with KFC and Pizza Hut as key verticals, said the company's management.

Shares of Sapphire Foods India slipped 9 per cent to Rs 297.50 on the BSE in Tuesday’s intra-day trade as the company's management expects near-term average daily sales (ADS) pressure and weak margins for two more quarters, impacting performance. However, long-term quick-service restaurant (QSR) drivers remain strong, with KFC and Pizza Hut as key verticals.

 

In the past two trading days, the stock declined 12 per cent. It had hit a 52-week low of Rs 259.20 on April 29, 2024. At 02:43 PM; Sapphire Foods was quoting 4 per cent lower at Rs 314.20, as compared to 0.02 per cent decline in the BSE Sensex.

 

 

Sapphire Foods started operations in September 2015, by the acquisition of about 270 KFC and Pizza Hut Stores in India and Sri Lanka, by a group of leading Private Equity firms and is managed by a team of professionals. Sapphire Foods is a leading YUM franchisee operator in the Indian subcontinent with presence in India, Sri Lanka and Maldives.

 

The company operates its restaurants in high traffic and high visibility locations in key metropolitan areas and cities across India and develops new restaurants in new trade areas in existing and new cities as part of its brand and food category expansion.

 

Sapphire Foods’ CEO Sanjay Purohit and CFO Vijay Jain in their meeting with Motilal Oswal Financial Services said the demand was stable in January 2025 but sluggish in February 2025, weighing on Q4FY25 Same-Store Sales Growth (SSSG).  Both brands face year-on-year (YoY) ADS pressure.

 

However, given the weak ADS/ROM performance over the last 12-15 months, there is potential for the operational performance to bottom out over the next two quarters if urban demand picks up. The QSR industry has not implemented any price hike in the last 12-15 months (focusing more on the value segment) despite general inflation being high. As a result, the QSR industry is better positioned on the affordability front for consumers.

 

The brokerage firm recently upgraded its view on the QSR universe from cautious to positive following the tax relief announced in the Budget 2025 for middle-class income. Additionally, QSR companies have already factored in the dismal operating performance.

 

“We model ~6 per cent SSSG and 18.5 per cent ROM for KFC, and 6 per cent SSSG with ~6.5 per cent ROM for Pizza Hut for FY26. We expect 14 per cent-15 per cent revenue CAGR during FY25E-27. Unlike Devyani, Sapphire operates with a co-owner mindset, focusing on store-level execution, advanced operational tools, and disciplined capital allocation. This approach drives higher efficiency and stronger unit economics,” analysts said post the management meet update.