United Foodbrands volume-led sales growth boosts operating leverage amid store expansion

Investment View and Q1 FY27 Highlights

Motilal Oswal Financial Services Limited retained its Neutral rating and Rs 775 target price for United Foodbrands following a strong Q1 FY27. The quarter was led by volume-driven same-store sales growth and operating leverage. The broker raised its FY27E and FY28E EBITDA estimates by about 4 per cent, but remains cautious about sustaining robust volume growth and expanding margins while the company continues to invest in value offerings and new restaurants.

Motilal Oswal believes the quarter indicates that United Foodbrands' structural initiatives are working. However, it expects reported same-store sales growth to moderate through FY27 because of a higher base, rather than weaker demand.

Consolidated Q1 FY27 Financial Performance

United Foodbrands reported consolidated Q1 FY27 sales of Rs 4,259 million, up 43 per cent year on year and ahead of Motilal Oswal's estimate of Rs 3,637 million. Same-store sales growth was 28.7 per cent, compared with the broker's 16 per cent estimate and 14.4 per cent in Q4 FY26, on a base of negative 3.4 per cent. Growth was entirely volume-led, as the company did not implement price increases.

Brand Performance and Store Expansion

Barbeque Nation India

Barbeque Nation India was the principal growth driver. Revenue increased 43 per cent year on year to Rs 3,284 million, supported by same-store sales growth of 33.5 per cent and 68.6 per cent growth in dine-in transactions. The brand added three restaurants in Q1 FY27, taking its network to 210 stores.

Gross margin declined 200 basis points year on year to 64.1 per cent because of value investments. However, restaurant operating margin before Ind AS increased 490 basis points to 14.5 per cent, driving a 117 per cent increase in restaurant operating profit.

Other Brands

• Barbeque Nation International: Revenue grew 46 per cent to Rs 385 million, with same-store sales growth of 8.5 per cent and one new store, taking the network to 14 stores.
• Premium CDR: Revenue grew 36 per cent to Rs 587 million, with same-store sales growth of 13.6 per cent. Its store base remained at 42.

Management Outlook and Expansion Plans

Management expects reported same-store sales growth to normalise or moderate through FY27 due to a higher base. It plans no price hikes and expects gross margin to improve directionally over time, with gradual margin improvement supported by operating leverage and procurement efficiencies.

Fifteen restaurants were under construction for opening in Q2 and Q3 FY27. United Foodbrands remains on track to exceed 300 restaurants by FY27-end. Management also increased its long-term potential estimate for the Barbeque Nation India brand to 600 restaurants from its prior 450-restaurant guidance, citing the success of the Big Buffet format in smaller markets.

FY27 capex guidance is Rs 1,400 million, including Rs 1,200 million for new stores and Rs 200 million for maintenance and refurbishments.

Revised Estimates and Valuation

Motilal Oswal's Rs 775 target price is based on 20 times March 2028E pre-Ind AS EV/EBITDA. The broker raised its FY27E and FY28E EBITDA estimates by about 4 per cent following the strong quarter.

Key Risks to the Neutral View

• Same-store sales growth may moderate in H2 FY27.
• Continued value investments and expansion spending may pressure margins.
• United Foodbrands has a volatile execution history.