Jubilant FoodWorks to Sapphire Foods: Top QSR stocks to watch out for in 2024

There has been a lot of interest among Indian investors around the fast-food space, or the quick-service restaurant (QSR) segment, in the past few years because of a change in the country’s ecosystem.

Due to rising urbanisation and higher eating-out frequency, investors see huge growth potential in QSR stocks. The recent pandemic-induced online ordering and delivery trend has also boosted prospects for the sector.

However, expensive valuations, intense competition in the sector and inflationary pressures have taken a toll on these stocks in the calendar year 2023, with most stocks underperforming the broader markets. On the other hand, experts believe that aggressive capex by these companies, along with a strong demand outlook, make them a good long-term bet.

If you also want to explore this sector for investments, here are the top stocks in the fast-food space that you can consider in 2024:

Jubilant FoodWorks

Jubilant FoodWorks Ltd operates the Domino's Pizza, Dunkin Donuts, Popeyes and Hong’s Kitchen franchises in India.

The stock was up nearly 11% in calendar year 2023 but has corrected 18% year-to-date in 2024 (as of the close on March 5). The recent correction came after weak earnings for the quarter ended December 2023.

Market experts say the current slowdown appears cyclical, and consumer sentiment may remain weak over the next few quarters. The company, meanwhile, has continued with its expansion spree, crossing the milestone of over 2,000 stores (all brands) in India.

Devyani International

Devyani International Ltd is the largest franchisee for Yum Brands, which include KFC, Pizza Hut and Taco Bell, in India. It is also the country's sole franchisee for Costa Coffee brand and cafes. The stock rose nearly 7% in the calendar year 2023.

However, year-to-date in 2024, it is down over 19% as Yum Restaurants sold its entire 4.4% stake in Devyani International for ₹871 crore through an open market transaction in February 2024.

Sapphire Foods

Sapphire Foods Ltd also operates KFC, Pizza Hut and Taco Bell restaurants across India, Sri Lanka and the Maldives. The stock has gained over 6% in 2023, while adding another 6% in 2024 so far this year.

The company aims to double the pizza store count in the next four years. However, experts believe that the KFC business would grow faster in the near-to-medium term. Steady performance of the KFC business is a big positive for the Sapphire Foods stock.

Westlife Foodworld

Westlife Foodworld Ltd operates McDonald’s restaurants across West and South India through its wholly-owned subsidiary Hardcastle Restaurants Pvt. Ltd. Westlife Foodworld shares inched up 3.5% in calendar year 2023. However, they are down 5.8% year-to-date in 2024.

Westlife said in December that external challenges in the form of negative global sentiment for McDonald’s are affecting sales. But, it expects demand to improve from here, though external challenges can hover around for another couple of quarters.

Restaurant Brands Asia

Restaurant Brands Asia Ltd is the national master franchisee of the Burger King brand in India. The stock remained largely flat in calendar year 2023 and is down nearly 8% year-to-date in 2024. Analysts say the long-term outlook for the company in India looks positive on the back of continuous improvement in store traffic, wider menu and strong growth in smaller towns.

In conclusion,

The QSR industry in India may not be in its best phase at present and could see a challenging time over the next couple of quarters. However, the long-term growth prospects stay intact on the back of a positive demand outlook as India’s consumption economy grows.