Sapphire Foods IPO: Sapphire Foods IPO Price | Value Research Sapphire Foods IPO: Read here to know how this quick-service restaurant operator has performed since its listing. Get to know about the Sapphire Foods IPO details, Sapphire Foods IPO price, stock performance and more.
IPO Analysis

IPO update: Sapphire Foods

Read here to know how this quick-service restaurant operator has performed since its listing

Sapphire Foods came out with its IPO about five months ago, and you can find our detailed analysis of the issue. In this update, we will look at the company's market performance and business performance post issue.

Our analysis of the IPO
We gave a score of 15 out of 27 to this quick-service restaurant (QSR) operator. Sapphire Foods is a franchisee of Yum! Brands (a US company). It operates three international brands: KFC, Pizza Hut, and Taco Bell. Sapphire Foods is the largest global QSR chain in Sri Lanka. As of December 2021, the company owns and operates 250 KFC and 209 Pizza Hut restaurants in India, 84 Pizza Hut and 5 Taco Bell restaurants in Sri Lanka and 1 KFC and 1 Pizza Hut restaurant in the Maldives. In total, the company operates 560 restaurants.

Our rating for Sapphire Foods was based on the following factors:

  • Out of the 11 business metrics, the company did well on four.
  • It scored five out of six on management-quality-related metrics.
  • The company cleared five out of eight financial metrics.
  • It cleared one valuation-related metric.

Stock performance since listing
Sapphire Foods saw a great response to its IPO, which was oversubscribed about 6.6 times. The qualified institutional buyers' (QIB) portion was oversubscribed 7.5 times, while the non-institutional investors' portion was oversubscribed 3.5 times and the retail portion 8.7 times.

The company had a promising debut on the stock exchange, with the shares listing 11.1 per cent over its issue price, opening at Rs 1,311 and ending the day at Rs 1,216. Post listing, the stock has trended upwards. The stock hit a low of Rs 974 per share within a few days of listing but then reached a high of Rs 1,435 on February 14, 2022. As of April 8, 2022, the stock closed at Rs 1,353, about 14.7 per cent higher than its issue price of Rs 1,180.

Business performance
In Q3 FY22, Sapphire Foods achieved its highest ever quarterly sales, EBITDA margin, profit after tax and new restaurant additions. Revenue increased YoY by 52 per cent to Rs 508 cr, and EBITDA stood at Rs 115 cr, representing a growth of 43.2 per cent YoY. Profit after tax was Rs 51 crore, compared to Rs 3 crore in Q3 FY21.

The company opened 31 KFC and 35 Pizza Hut restaurants in Q3 FY21. For the nine months ended December 2021, the YoY same-store sales growth (SSSG) for KFC India, Pizza Hut India and Sri Lanka business was 70 per cent, 62 per cent and 39 per cent, respectively.

What to do now?
The company's portfolio of leading international brands and its relationship with Yum! Brands provide it with Yum's expertise and economies of scale. That's because of the 'One System' commercial negotiations where it negotiates with its suppliers, jointly with Yum! Brands and its other franchisees in India. The company is also making great strides with its omnichannel new restaurant model. This is reflected in the increasing share of the revenue from the delivery channel of 51 per cent for nine months in the financial year 2022, compared to 42 per cent in FY21. Moreover, it has been reducing the average size of newly opened restaurants by about 45 per cent (compared to FY19) across KFC India and Pizza Hut India.

Sapphire Foods is looking to capture future growth through both the organic and inorganic routes. While the IPO was an offer for sale, the company raised about Rs 474 crore in August 2021 through preferential allotment. Its cash position (net of debt) stands at about Rs 435 crore as of December 2021. As the company has generated a profit of only Rs 5.8 crore in the trailing twelve-month period ending December 2021, its P/E is at 1,483 times. However, without further disruptions from Covid-19, the company should be able to scale up and grow quickly. Keep a watch on this firm.

Disclaimer: This analysis is not meant to serve as a recommendation. Do your research before investing in the company. If you are interested in our stock recommendations, please visit Value Research Stock Advisor.

Also read:

Sapphire Foods IPO: Information analysis

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