QSR stocks witnessed a significant rally on Friday with Travel Food Services surging 10% to ₹1,465.10 and Restaurant Brands Asia soaring 5% to ₹94.60, both hitting 52-week highs on the BSE. According to Business Standard, Devyani International, Sapphire Foods India, and Jubilant FoodWorks were up 2-7% in Friday's trade. The rally came on the back of healthy June 2026 quarter results, with the BSE Sensex down 0.53% at 78,535.55 during the same period. This performance demonstrates strong investor confidence in the sector's recovery trajectory and improved operational metrics.
Restaurant Brands Asia (RBA) zoomed 42% during the first five trading days of August, building on strong Q1FY27 results. The company posted a consolidated net loss of ₹28.3 crore for Q1FY27, significantly improved from ₹48 crore in the same period last year. As reported by Business Standard, revenue grew 18% year-on-year to ₹822.6 crore, driven by strong India business performance while Indonesia continued to weigh on overall growth. The company maintained industry-leading same-store sales growth (SSSG) at 13%, supported by healthy traction across dine-in and delivery channels. RBA added nine stores in Q1 and reiterated its plan to open 80 stores in FY27, while management remains focused on improving profitability through pricing optimization and tighter cost controls.
The Indian quick-service restaurant (QSR) sector is trading at a steep valuation discount to organised retail players such as Trent, despite operating a much larger store network. The entire QSR universe represents a market cap of ₹67,000 crore with India revenue of ₹20,000 crore and India store network of more than 6,600. According to Motilal Oswal Financial Services, the aggregate market cap of listed QSR companies has declined by 20% during FY22-26, with the last 12 months seeing a 25% correction. Listed QSR companies operate 6,627 stores, far exceeding the total store network of Trent, Titan Jewellery and Avenue Supermarts combined. However, Motilal Oswal believes the current valuations largely factor in weak unit economics and sees scope for a re-rating as demand and profitability recover.
Motilal Oswal remains selective in the space, favouring companies with robust delivery footprints, lean balance sheets, and proven execution capabilities. The brokerage maintains 'Buy' ratings on Devyani International (target price ₹160), Sapphire Foods (target price ₹245), and Restaurant Brands Asia (target price ₹125). The firm upgraded Jubilant FoodWorks to 'Buy' from 'Neutral' with a revised target price of ₹625, indicating significant upside potential of 27.6%, 34.4%, and 27.6% respectively. For Restaurant Brands Asia, Motilal Oswal sees the highest upside potential with a target price of ₹125, implying a 48% upside. The brokerage also maintains 'Neutral' ratings on Westlife and United Foodbrands with target prices of ₹550 and ₹775 respectively.
According to Motilal Oswal, faster store rollout has affected the unit economics of the QSR sector, with new stores added in the last four years accounting for over 40% of total stores. The brokerage expects the store addition pace will be slower to 10-11% over FY27-28 versus 15% over FY22-26. As reported by Business Standard, Motilal Oswal believes store unit economics might not see any more deterioration, with any improvement in profitability metrics expected to drive up valuations quickly for QSR companies. The sector has witnessed a valuation correction following weak profitability over FY23-26, with valuation multiples likely to be driven more by improvement in SSSG, store productivity and earnings delivery rather than store expansion alone. Since the sector has been witnessing sequential improvements in earnings for the past two quarters, analysts believe a gradual rerating in valuations is likely.
