RBA - Restaurant Brands Asia Limited Share Price

Outlook and Major Points from Management:

India Business Outlook:

• Expansion: Target to continue store growth (510 stores as of Dec 2024), focusing on café integration and digital infrastructure.
• Dine-in Recovery: Prioritizing dine-in traffic through value strategies (e.g., 2-for-Rs.79/99 deals, app-exclusive coupons) and menu innovations (veg/chicken puffs, shareable meals).
• Digital Focus: 90% of orders now digital; 437 stores equipped with self-ordering kiosks (SOKs), aiming for 100% coverage. App downloads grew 30% YoY (13M cumulative).
• Profitability: Improved delivery margins by 70 bps via pricing optimization and commission renegotiations. Gross margins at 67.8%, with plans to further reduce G&A costs.
• FY26 Plans: Finalizing annual operating plan; growth momentum expected with cost efficiencies and SSSG recovery.

Indonesia Business Outlook:

• Restructuring: Closed 15 underperforming stores (147 operational). Focus on rent renegotiations, cost cuts (corporate G&A reduced from Rs.65Cr to ~Rs.45Cr), and marketing.
• Demand Recovery: Early signs of dine-in recovery post-geopolitical tensions (Nov-Dec 2024 ADS growth). Popeyes ADS at IDR 14M; BK SSSG improved to -4.1% (from deeper negatives).
• No New Stores: Paused expansions; prioritizing profitability.

Key Highlights:

• India: Revenue up 11.2% YoY to Rs.494Cr; restaurant EBITDA at Rs.59.6Cr (+9.7% YoY).
• Indonesia: Revenue declined 9.5% YoY (store closures), but margins improved.
• Consolidated EBITDA: Rs.30.9Cr (+2% YoY), driven by India's operational efficiency.

Future Strategy:

• India: Drive CRM/loyalty programs post-digital rollout; café awareness campaigns.
• Indonesia: Optimize menu (chicken focus), stabilize sales, and evaluate market viability long-term.

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Question 1: "My first question, if you could just share your thoughts on the near-term demand trends in India? And how do you see the same-store sales growth path for us?"
Answer: Dine-in traffic continues improving due to value-driven strategies and digital adoption. Delivery profitability is prioritized through optimized pricing and commission negotiations. SSSG is expected to improve as dine-in gains offset deliberate delivery moderation, supported by stable demand trends.

Question 2: "As we explore the path to raise additional growth capital, could you also share your thoughts on how should we look at capital allocation between India and Indonesia?"
Answer: Indonesia will focus on marketing and cost reduction (rent renegotiations, G&A cuts) without new store investments. Capital allocation prioritizes India's expansion (510 stores now, continued growth), while Indonesia aims for breakeven via operational efficiency, not store additions.

Question 3: "Would it be fair to say at this point that Indonesia from here is sort of looking only up? [...] we should start seeing an inflection in same-store sales growth?"
Answer: Geopolitical tensions easing and store optimizations (closures, rent cuts) are driving early dine-in recovery. SSSG improved to -4.1% (from deeper negatives), with marketing investments and menu innovations expected to sustain momentum. No new stores; breakeven remains the goal.

Question 4: "What measures have you taken to improve delivery business profitability in India? [...] Is it essentially reducing discounting or better commission negotiations?"
Answer: Delivery profitability rose 70 bps via menu/pricing optimization, selective discounting, and lower aggregator commissions. Margin differentials vs. dine-in are undisclosed, but profitability is prioritized over volume. Continued negotiations and product mix adjustments aim for further gains.

Question 5: "What is the ADS you need to reach 10% EBITDA margin? [...] How should we view Indonesia's capital allocation, including potential divestment?"
Answer: Margin improvement relies on G&A optimization, utility savings, and SSSG recovery. Indonesia's turnaround depends on sustained sales recovery and cost cuts; divestment remains an option if breakeven isn't achievable. No new stores; RBI supports but hasn't waived royalties.

Question 6: "What drove dine-in recovery in India? [...] How do you assess ROI on digital initiatives?"
Answer: Value offerings (e.g., 2-for-Rs.79 deals), snacking innovations (puffs), and café expansion drove traffic. Digital kiosks/QR ordering (90% digital sales) improved check sizes, operational efficiency, and customer insights, enabling targeted marketing. ROI includes higher frequency and cost-effective engagement.

Question 7: "Is store growth slowing? Why has SG&A risen sharply, and how will you reduce it?"
Answer: Store growth continues unabated (69 YoY additions); new targets post-FY25 planning. SG&A reduction focuses on contract renegotiations, process efficiency, and bloat checks"”not headcount cuts. G&A as % revenue fell from ~10% to 5.5%; further declines expected via scale and disciplined reviews.