Restaurant Brands Asia sees strongest same-store sales growth in 15 quarters

Investment View and Valuation

Prabhudas Lilladher's August 04, 2026 result update on Restaurant Brands Asia (RBA) retains an Accumulate rating and raises its SOTP-based target price to Rs93 from Rs76. The broker views the India business as being on track, supported by a value-led menu, premiumisation, utility-cost reduction and improving Burger King Café average daily sales.

Prabhudas Lilladher believes operating leverage, tighter cost control and higher other income from capital infusion can enable the India business to turn PAT-positive in FY27E. A potential exit from the Indonesia business remains an important determinant of the overall investment case.

The Rs93 target is derived from a sum-of-the-parts valuation, comprising Rs82 per share for India using DCF and Rs11 per share for Indonesia based on book value.

Q1 FY27 India Performance

RBA reported healthy Q1 FY27 India performance. Net sales grew 23.6 per cent year on year to Rs6,829 million, ahead of Prabhudas Lilladher's Rs6,506 million estimate. India same-store sales growth was 12.6 per cent, the highest in 15 quarters, driven primarily by stronger traffic without significant price increases.

Margins and Profitability

Gross margin expanded 313 basis points year on year to 70.8 per cent, above Prabhudas Lilladher's 69.5 per cent estimate. Consolidated EBITDA rose 43.1 per cent year on year to Rs974.9 million, although it was 3 per cent below the broker's Rs1,008 million estimate.

EBITDA margin improved 194 basis points year on year to 14.3 per cent, but was 120 basis points below the broker's 15.5 per cent forecast. Corporate overheads declined about 10 per cent under strict cost control.

Adjusted PAT was a Rs31.7 million loss compared with a Rs3 million loss in Q4 FY26 and Prabhudas Lilladher's forecast of a Rs38 million profit. This was primarily because of a Rs120 million mark-to-market foreign-exchange loss on the Indonesia investment.

India Growth Strategy and Outlook

Management plans to add around 80 India stores and is targeting a 72 per cent India gross margin over the next two to three years. The improvement is expected to come through supply-chain clustering, product mix and new initiatives rather than price increases.

The strategy combines value offerings, including two vegetarian burgers at Rs79, chicken offerings at Rs99 and café offerings at Rs99, with premium products such as Whopper Deluxe and Kings Collection. Management has introduced co-branded desserts and shakes and plans premium Korean and peri peri burgers.

Management aims to lift long-term Café average daily sales to Rs25,000. It also said cash generation will be reinvested for growth rather than used for dividends to service promoter debt.

Indonesia Business Remains the Principal Drag

Q1 FY27 Indonesia revenue declined 3.9 per cent year on year to Rs1,397 million, and the business recorded a Rs91 million company EBITDA loss despite gross margin improving 147 basis points to 58.2 per cent.

Burger King Indonesia continued to underperform, while Popeyes had muted traction amid strong competition from regional players. RBA is exploring strategic options for Popeyes in Indonesia. In the meantime, the Indonesia business is focused on operational optimisation and efficiency rather than store expansion.

Franchisor RBI has committed US$9 million of Indonesia marketing support over three years.

Estimates and Key Risks

Prabhudas Lilladher increased its FY27E and FY28E sales estimates by 2.2 per cent, EBITDA estimates by 4.7 per cent and 7.4 per cent, and EPS estimates by 150.0 per cent and 36.4 per cent, respectively.

Key risks to the thesis include a weaker demand recovery, continued losses and strategic uncertainty in Indonesia, muted Popeyes performance, and margin or profitability falling short of forecasts.