RBA at this valuation is a good buy in my opinion. With the QIP of 500cr, they have runway to grow their stores for the next 3~4 years without incurring significant debt. Market opportunity in my opinion is huge inspite of talks about unorganized players or local fast food due to the massive population.
Indonesia is currently a bit messy, but I believe that is why the valuations are so attractive. Management is trying their best to turn it around, does not seem to be quite easy due to the operating deleverage due to store closures, negative SSSG etc. But in the long term, I believe if they improve the product and just try to weather the storm, it can also create value. But they need to achieve breakeven atleast for now, as cash bleeding will create problems for the Indian entity as well financially in the medium term.
Talking about the Indian BK experience; as someone who eats fast food frequently, I am quite happy with the food as well as the pricing they are offering. I absolutely love their Korean menu. Service still leaves a lot to be desired, atleast in the regular outlets I visit. Takes too much time to prepare the order which defeats the purpose of fast food and also not that customer friendly. I believe they are working on improving on atleast the customer experience. Hoping on improvement on that front..
Discl: Significant part of my portfolio is in RBA, looking to add more when possible subject to company performance.
Not an apple to apple comparison to BK as many details like debt, future expansion plan, target number of stores, SSG, capex for each store, COCO, COFO, FOFO etc are not available. But still this gives some rough idea of valuation PE guys are paying for Theobrama.
Results are out. Loses are reducing. I am still trying to figure why with less store count of Mcdonald as compare to Burger king, Mcdonald still able to achieve higher gross margins of 71 %?
I think the definition for calculation of gross margins by Mcdonalds and BK is slightly different. Mcdonalds does not consider the packaging and paper costs in its Gross margins whereas Burger King does.
Secondly, Westlife mcdonalds only serves in west and south whereas BK india is spread out over entire India. So even if there is slight difference in number of restaurants, logistics costs for westlife would be better.
Third, mcdonalds has been there for 25 years and BK for 10 years. So vendor contracts must be favorable for westlife (my assumption, may not be true).
You mean to say that concentrated region wise stores helps in dealing with logistics cost of raw material? If this is true then with more store opening burger king will also attain the same gross margins.
With increase in sales store operating leverage will also kick in reducing overall operating cost of employees, advertisement cost etc. fixed loyalty fees will also start benefitting Burger king when store count increases.
In my opinion every things is aligning with rate of new store growth along with increase in sssg.
Disclaimer: Holding and biased (still learning) and wondering why management is not closing indonesia business who geography wise is difficult to conquer.
Listened the concall, and found that things are moving in right direction. They are re negotiating rent of stores, and finalize lower rent for new store which will improve the operating cost.
There is one-off of 6 crores in terms of ESOP and other employee expenses.
They are struggling in Popeyes in Indonesia.
They are also introducing local cuisine of chicken in Indonesia.
Average daily sale in Indonesia is increasing which are first green shots.
Management is saying they are some pressure points in premium category of burgers like king category. They are reinventing the same with king 2.0.
Will study again once transcript is released. Why SSSG has fallen from 5.5 to 2.6 % in this quarter is still remains unanswered.
All QSR including RBA are down between 15-20% in matter of 25 days whereas indices have gone up by 4%. Seem sector getting de-rated. Any thoughts on the reasons especially when government has pushed liquidity into hands of people?
It feels like PMS fund managers want to accumulate at lower price, hence, pushing the price down. I have seen this happening a lot in many companies, when results were good and still price went down significantly and later in a matter of months price doubled/tripled.
Consumer demand (especially discretionary) is coming back, SSSG has been healthy for the last many quarters, company is fully capitalized, Indian business is doing very good and loss has also been significantly reduced for Indian business. Green shoots in Indonesian business are finally visible; war sentiment in easing out. Given the steps taken by Indian gov and RBI, demand will only improve from on wards.
I really don’t know why would market de-rate the QSR sector as a whole, this is really the time when this sector should grow. This Friday, I think, the sector really hits it’s bottom end of the valuation and from now it should either go up or further consolidate until the Q2 2026 result.
Disc. Invested, I may be terribly wrong so do your own research
If QIP was done at 50 rs then why should retailers pay a premium. Let it fall to the true value of 50 rs. Does anyone have a rational thought process on significant decline in promoter holding?
Disc: tracking as I am frequent burger king customer.
QIP was done at 60, it can of course touch that price but looks highly unlikely. Nevertheless if the entire sector is falling, how can RBA be immune?
I will add more if 60 ever comes, very fast growing and interesting sector with a huge opportunity.
I asked ChatGPT to consolidate the management and discussion section of the recent RBA annual report and there is the excerpt:
QSR Market Outlook
Market size & growth:
The organised Indian QSR sector reached ₹649 billion in FY 2024 and is projected to grow at a 17.9% CAGR, reaching ₹1,476 billion by FY 2029.
Chain restaurants (58% share now) will expand to ~60% by FY 2029. *
Growth drivers:
Rapid urbanisation , higher disposable income , and digitalisation of ordering.
Increasing penetration into tier-II and tier-III cities using cluster-based growth.
Use of AI/ML for crowd and kitchen management , improving efficiency.
Consumers shifting toward convenience, affordability, and consistent quality.
Implication: If industry CAGR holds, India alone could more than double QSR value by FY 2029, directly benefiting RBA through store expansion and higher per-store productivity.v
Indonesia – QSR Market Outlook
Market size & trajectory: Valued at USD 4.1 billion in 2023, the Indonesian QSR market has grown at 13.6% CAGR since 2020 and is expected to reach USD 6.1 billion by 2028 at an 8.3% CAGR .Chain restaurants form 63% of market share, forecasted to rise to 64% by 2025.
Structural opportunity:
Very low outlet density —only 76 QSR outlets per million urban population , far below China (>200) and the U.S. (>500) .
Rising middle class , mall growth , and delivery platforms are expanding QSR reach.
Implication: Even moderate success in capturing 10–15% of the forecasted USD 2 billion incremental market by 2028 could add USD 200–300 million potential sales opportunity over five years for RBA’s Indonesia segment.
I have bought again at 70 rupees and it’s weight has become no. 2 after Satin credit care(Micro finance)in portfolio . I still have cash but now as price is falling, I fear in buying more. The reason for the same it is still loss making company, although loss are reducing quarter by quarter.
I don’t understand why contranian investing is so difficult to practice. Business of company doesn’t change at 80 rupees ( my buying price) and it remains same at 70 rupees (current market price). I am not fearing at 80 rupees during buying but at 70 when price become more attractive, I am buying with fear. Only god knows and fully understand about human psychology.
Disclaimer: Holding and biased.
Promoter is Private equity investment firm. They might have their lifecycle (capital infusion, growth and exit). RBI (Restaurant brands international) has the control over the brand and has the say in expansion plans.
Qip was done at 60/share. Stock was around 62 at that time.
You are feeling difficulty here because you are not able to get to an intrinsic value of the business with conviction. The more conviction one has about the business, the more confident one is about buying and selling decisions.
That said, in a loss making company which also needs frequent equity infusion, it is difficult to calculate the intrinsic value even in a range.
Implication: If industry CAGR holds, India alone could more than double QSR value by FY 2029, directly benefiting RBA through store expansion and higher per-store productivity.v