Burger King, The Bull

The ambitious expansion plans and capping a royalty rate of 5 percent is luring investors to invest in Burger King to become a bull.


On 19th July 2021, the share price of Quick Service Restaurant (QSR) chain Burger King India gained 5 percent to Rs 177 apiece on BSE even as BSE Sensex and Nifty 50 went red. The share of Burger King has increased by 12.16 percent over the month where a total of 2.93 million shares changed hands that resulted in a turnover of Rs 5.12 crore and ballooned its market capitalisation to Rs 6673 crore on the BSE. Burger King’s shares, with a previous close of Rs 168.50, opened at Rs 168. 

Burger King’s Growth Trajectory in Market 

Burger King’s performance in the stock market has been stellar since its debut in December 2020, where its initial stocks were listed at Rs 115.35, against an issue price of Rs 60 on the BSE. While on the NSE it made its debut opening at Rs 112.50, an 87.50 percent premium over IPO price. Since then the stocks have soared over 63 percent while zooming a huge 195 percent from the IPO price of Rs 60 piece. 

Current Market Stock Price of Burger King: As of 20th July 2021, Burger King’s stocks opened at Rs 179.9 and closed at Rs 178.25. 

‘‘

On 19th July 2021, the share price of QSR chain Burger King India gained 5 percent to Rs 177 apiece on BSE even as BSE Sensex and Nifty 50 went red. 

Burger King attracting investments to become a Bull, But Why? 

The QSR food industry is dominated by three players: Jubilant Foodworks, Westlife Development and Burger King. Out of which Burger King’s network expansion is at a faster pace than the two. Its ambitious plans of opening 700 stores by December 2025 speak volumes about its potential to expand and improve its profitability. With their strong marketing strategies, they have established a loyal customer base. It is making a big shift in its business model by introducing Burger King Café and barbell product strategy i.e. investing in the two extremes of high-risk and no-risk assets.

Moreover, Burger King has achieved a royalty rate of 5 percent until 2039 unlike Jubilant and Westlife whose royalty rates are 3 and 4 percent respectively. A royalty rate is an amount paid by a third party to the owner of a product or patent for the use of that product or patent. Royalty investments showcase a steady income and are considered less risky than traditional stocks which is why it is an interesting investment opportunity for the investors in the market. 

What are analysts saying about Burger King? 

Market analysts are affirmative about investing in Burger King. They are suggesting that both short-term and long-term investors are going to benefit by investing in it. The long-term investors are advised to stay invested in the company since there is ample scope available for Burger King to increase its business in India and gain market share by opening more stores than its competitor. 

The QSR Industry is Luring Investors Recently 

The QSRs have gained a major market foothold in a short period and have been luring investors in the pandemic. Despite the QSR sales taking a dip in the pandemic, a report from Kotak Institutional suggests that India’s organized food services market is expected to grow at about 10.5 percent CAGR to $37 billion in 2020-2025. Within that, the QSRs have a potential growing at 13 percent CAGR amounting to $9.5 billion.

Lack of funds and revenues are closing many unorganised restaurants that are likely to benefit the QSRs. Food aggregator apps have lowered the slashed food prices and with the commission payment, the restaurants are finding it difficult to sustain. QSRs, on the other hand, have strong access to capital that will help them bolster store expansion plans and expand their footprint in the home delivery market.

To maximise profits and return ratios, the QSRs are closing down the non-performing stores and introducing delivery fees to bridge the price gaps between in-store and online menus

DU Desk
DU Desk
Stories from DU Desk are the collective efforts of our in-house authors, guest authors and subject matter experts who collate and distill their ideas and thoughts to bring out actionable insights for our readers.

YOUR VIEW MATTERS

LEAVE A REPLY

Please enter your comment!
Please enter your name here

Disclaimer: The opinions expressed by columnists are their own, not those of Dutch Uncles

If you wish to contribute or have a story suggestion,
email to editor@dutchuncles.in

ALSO READ

Become a Smart Trader of Dalal Street...

India has made gradual progress over the decade in...

This is How 2% Rule in Stock...

In the 4th test of the 2001 Ashes tournament,...

Active or Passive Investment: What’s the Right...

Whether to invest actively or passively has always been...