Restaurant Brands Asia India SSSG surge and margin gains strengthen FY27 growth outlook

Investment View and Recommendation

Motilal Oswal Financial Services’ August 3, 2026 results update describes Restaurant Brands Asia’s Q1 FY27 performance as a confidence-boosting print, led by strong India demand and materially better profitability. The broker reiterates a BUY recommendation with a target price of Rs 125, versus a current market price of Rs 71.

The positive view rests on improving store-level economics in India, sustained expansion and the potential for a gradual reduction in Indonesian losses. The principal monitorable is the pace and sustainability of the Indonesia turnaround.

India Business: Strong Demand and Store-Level Recovery

Restaurant Brands Asia’s India business reported revenue growth of 24 per cent year on year to Rs 6,829 million in Q1 FY27, ahead of MOFSL’s estimate of Rs 6,571 million. Same-store sales growth was 12.6 per cent, versus the broker’s estimate of 8 per cent and the highest level in 15 quarters. India average daily sales rose 9 per cent year on year to Rs 131,000.

The company added nine Indian stores during the quarter, taking the India store base to 590. Management attributed the demand strength to traction in both dine-in and delivery channels, helped by value offerings. Momentum continued into July, with Peri Burgers and Korean Burgers receiving a strong consumer response and contributing incremental traffic.

India Profitability Improvement

India gross profit increased 29 per cent year on year to Rs 4,837 million. Gross margin expanded by 310 basis points year on year and 60 basis points quarter on quarter to 70.8 per cent. MOFSL attributes the improvement to favourable product mix, menu optimisation and supply-chain efficiencies; Restaurant Brands Asia did not announce meaningful price hikes during the quarter.

Restaurant operating margin, pre-Ind AS, rose 350 basis points year on year to 13.2 per cent. Pre-Ind AS EBITDA increased 134 per cent year on year to Rs 527 million, substantially above MOFSL’s estimate of Rs 369 million. The 7.7 per cent pre-Ind AS EBITDA margin was an all-time high, supported by operating leverage.

Post-Ind AS India EBITDA rose 31 per cent to Rs 975 million. However, higher depreciation and interest resulted in an India loss of Rs 32 million.

Indonesia: Losses Narrow, but Turnaround Remains the Key Monitorable

Indonesia remained the weak link in Q1 FY27. Revenue declined 4 per cent year on year to Rs 1,397 million, while Burger King Indonesia average daily sales fell 4 per cent to Rs 102,000. There were no new store additions, leaving 137 Burger King and 25 Popeyes Indonesia stores.

Despite the revenue decline, gross margin expanded 150 basis points to 58.2 per cent. Restaurant operating margin improved to Rs 33 million from Rs 2 million a year earlier, and post-Ind AS EBITDA was Rs 27 million versus a Rs 25 million loss in Q4 FY26. The pre-Ind AS EBITDA loss narrowed to Rs 91 million from Rs 106 million.

Management highlighted bone-in chicken as a key Indonesian growth driver, accounting for roughly 50 per cent of Burger King Indonesia sales versus 30 per cent at acquisition. The company has largely completed Burger King store rationalisation and does not currently intend to expand in Indonesia, prioritising profitability and cost control.

Consolidated Q1 FY27 Performance

Consolidated Q1 FY27 revenue grew 18 per cent year on year to Rs 8,226 million. Gross margin expanded 330 basis points to 68.7 per cent, while post-Ind AS EBITDA increased 33 per cent to Rs 1,002 million and the margin improved by 140 basis points to 12.2 per cent.

The consolidated net loss narrowed to Rs 330 million from Rs 454 million, although depreciation and interest remained high. Management reiterated plans to open 80 stores in FY27 and said operating cash flows will be directed towards expansion rather than dividends.

Potential investments in backward integration, solar power and operational efficiencies are being evaluated, with no final decisions taken.

Estimates, Valuation and Outlook

MOFSL raised its FY27E and FY28E EBITDA estimates by 5 per cent and 8 per cent, respectively, reflecting better margin delivery. It expects maturing Indian stores and improving new-outlet contribution to support margin recovery, while near-term challenges in Indonesia are expected to persist.

The Rs 125 target price values India at 25 times March 31, 2028 estimated pre-Ind AS EV/EBITDA. Indonesia is valued at an enterprise value of Rs 5,000 million, or approximately 0.9 times March 31, 2028 estimated EV/sales.

Key Monitorable

The principal risk to the positive view is the pace and sustainability of the Indonesia turnaround. MOFSL expects near-term challenges in Indonesia to continue, even as the company prioritises profitability and cost control and India’s improving store-level economics support the broader growth outlook.