Yesterday, I was trying to understand this company after the stock prices fell drastically. My mindset was to look for reasons buy this share, thus, I wasn’t completely unbiased. Below are the Big Pictures things I found
- Company did the IPO to raise money to open 700 outlets by the end of 2026. Issue price was 60 Rs. Also, if I am not misunderstood, I read that the promoters bought fresh issue at more than 60 Rs, One year prior to the IPO.
- The stock doubled on the first day. On that day, the liquidity was suck in by many institutions, which again increased the stock price and it became 3.5 times at one point within the first 5-7 days.
- With that, the promoters thought of getting out of the stock and they are still selling whenever they get the chance.
- Looking at high valuations, the management did the QIP and raised money at 136 Rs. The stock price then fell.
- In the company, the management wanting to expand aggressively to achieve their obligation to their masters(which actually is the promoter entity!!!), burned a lot of cash. And are still burning.
- Their strategy is the “Barbel Strategy”. Lure people by value and also sell premium items. Their value pack also has a great Gross Margins apparently. They also started BN cafe to increase product lines and they also have better margins(Someone in the thread mentioned about Starbuck’s report on Coffee as beverage.)
- They were, I believe, forced to acquire the Indonesian company by their parent. At one point they are also burning a lot of cash in the Indian market to grow. On the other hand, the Indonesia is also not doing well.
- My observation in this thread is that, initially people said “No one goes to Burger King”. Later, said – “People now a days go to Burger King rather than Macdonalds or KFC, as Burger King offer both the foods that these Two guys offer”.
- By September, 2024, they have 464 restaurants. And they are setting the target of 500 by this year. Which still requires them to open 200 restaurants within next Two years.
- They are doing well technology wise, gross margin wise, SSSG wise and off course Sales growth wise(more restaurants). Still they are losing a lot of money
I might have missed a lot of things here. Let’s see the negatives:
- Promoters selling
- Loss making
- Still a lot of forced expansion left.
- Indonesia
Positives:
- Lowest sales to market cap. Sale are likely to grow more.
- They also have gained popularity for their products.
I have bought very very small amount out of FOMO(And now I tell my self that it’s for tracking purpose), and looking for good reasons to buy significant amount. I see no reason to do that, considering the uncertainty over the next Two years for this stock. I guess that is the reason why it is cheaper. Waiting for people to be more fearful before taking action.
(Just an FYI – Q Int/Sale meaning interest in latest quarter to sales in the latest quarter.)
Talking about other Food Brands:
I also like Barbeque Nation as it is a company owned brand(Not Franchise) which also is a leader Grilled Barbeque. Favoring BN because, it is not bound by their masters and thus can adjust their strategies. Sadly that too is a loss making, but I am optimistic(biased). I own less than 2 percent. In 2 percent profit.
I also own significant Sapphire foods because of (previously) its low valuation(Favorable P/B) compared to Devyani and others in category. (4-6 percent). In somewhat profit here as well.
One more thing that I noticed, and I hope someone can help me understand it better.
- In Ahmedabad, in my area, Burger King is at the best location compared to all the other brands. It is also bigger than other Fast food chains.
- KFC is a bit far, has Two floors and quite small.
- Barbeque Nation is often seen up on the First floor. It’s because – BN is not a Fast food chain.
This could be one area thing. Couldn’t help but mention
Regarding RBA – Today, I am a little less interested to buy than yesterday(2nd November, 2024)
- Tracking
- Looking for go even further before buying again(this time significant). However, thinking of still holding what I had (out of FOMO) bought.
Let me know where I could be wrong. I would love it!!! Thank You 
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