Devyani International Stock Soars 8% on Jefferies Upgrade

Shares of Devyani International Ltd. (DIL), a major franchisee for Yum Brands in India, surged nearly 8% on Thursday, February 5, 2026. The rally was primarily triggered by a rating upgrade from global brokerage firm Jefferies, which expressed renewed confidence in the company's growth trajectory following key leadership changes and early signs of operational improvements. The stock climbed to a day's high of Rs 132.88, marking a significant single-day gain despite a challenging year.

Brokerages Turn Bullish on Growth Prospects

The primary catalyst for the stock's upward movement was Jefferies' decision to upgrade its rating on Devyani International to 'Buy' from 'Hold'. The firm maintained its price target of Rs 145 per share, suggesting a potential upside of over 25% from its previous close. Jefferies noted that the recent 17% correction from its peak presented an attractive entry point for investors.

Other major brokerages echoed this positive sentiment. Macquarie, Bernstein, and Goldman Sachs all have 'Outperform' or 'Buy' ratings with a price target of Rs 160. Citi is even more optimistic, maintaining a 'Buy' rating with a target of Rs 192. This broad consensus among analysts underscores a growing belief in the company's long-term potential, even as it navigates short-term headwinds.

New Leadership to Steer Strategy

A significant factor influencing analyst confidence is the upcoming leadership transition. Devyani International announced that its current Chief Financial Officer (CFO), Manish Dawar, will be promoted to Chief Executive Officer (CEO), effective April 1, 2026. He will succeed Virag Joshi, who is set to retire but will remain on the board as a Non-Executive Director.

Analysts view this move as a positive step that ensures leadership continuity while empowering the new CEO to conduct a thorough business review. The expectation is that Dawar will implement fresh strategies to place the franchise back on a path of sustainable growth, particularly focusing on turning around underperforming segments.

A Closer Look at Q3 Financials

Devyani International's third-quarter results presented a mixed picture. The company reported a consolidated revenue growth of over 10% year-over-year, which was slightly below analyst expectations. However, its consolidated net loss widened to Rs 109 crore for the quarter ending December 2025.

On a positive note, consolidated EBITDA grew by 3% year-over-year, surpassing estimates. The company's gross margin expanded by 20 basis points, and its EBITDA margin stood at 16%, also ahead of forecasts. This indicates some success in managing costs despite a challenging demand environment.

Performance Across Key Brands

The performance varied significantly across Devyani's brand portfolio.

KFC India: The brand showed sequential improvement in same-store sales growth (SSSG), though it remained in negative territory at -2.9%. Revenue for KFC grew 6% year-over-year. Average daily sales improved quarter-on-quarter to ₹90,000. Gross margin saw a healthy increase of 115 basis points to 69.8%, attributed to cost efficiencies.

Pizza Hut India: This segment continued to struggle, with SSSG declining sharply by -9.1%, marking one of its weakest quarters. Revenue fell by 6% year-over-year, impacted by a 10% drop in delivery sales. The company's management has acknowledged the challenges and plans to close loss-making Pizza Hut stores, with no net additions planned for the calendar year 2026.

Other Brands and International Business: Franchised brands saw a 9% revenue growth with improved margins. The international business also performed well, growing 10% year-over-year with better profitability. Notably, the recently acquired Biryani By Kilo (BBK) brand achieved EBITDA break-even ahead of schedule.

Network Expansion and Strategic Outlook

Despite the mixed performance, Devyani continued its network expansion in Q3, adding 95 net new stores. This included 75 in India (54 KFC, 18 Pizza Hut, 17 own brands) and 20 internationally. Simultaneously, the company closed 13 underperforming franchise stores to optimize its portfolio. As of December 2025, its total store count reached 2,279.

Looking ahead, management shared that January 2026 had started on a positive note, with positive SSSG trends across all brands except Pizza Hut. This early sign of consumption improvement provides a glimmer of hope for the upcoming quarter. The proposed merger with Sapphire Foods is also viewed by analysts as a strategic long-term positive, although it may introduce some uncertainty in the short term.

Conclusion

The sharp rally in Devyani International's stock reflects a shift in investor sentiment, driven by strong endorsements from leading brokerages and a clear path for leadership succession. While the Q3 results highlight persistent challenges, especially with Pizza Hut, the early signs of a demand recovery in January and strategic moves like network optimization provide a foundation for future growth. The new CEO's ability to execute a successful turnaround for Pizza Hut will be a key factor to watch in the coming year.