With the business potentially at an important milestone, we thought we'd take a closer look at Burger King India Limited's (NSE:BURGERKING) future prospects. Burger King India Limited operates as a franchisee of Burger King quick service restaurants in India. The ₹38b market-cap company posted a loss in its most recent financial year of ₹766m and a latest trailing-twelve-month loss of ₹1.9b leading to an even wider gap between loss and breakeven. Many investors are wondering about the rate at which Burger King India will turn a profit, with the big question being “when will the company breakeven?” Below we will provide a high-level summary of the industry analysts’ expectations for the company.
Burger King India is bordering on breakeven, according to the 4 Indian Hospitality analysts. They expect the company to post a final loss in 2022, before turning a profit of ₹142m in 2023. Therefore, the company is expected to breakeven roughly 2 years from today. In order to meet this breakeven date, we calculated the rate at which the company must grow year-on-year. It turns out an average annual growth rate of 70% is expected, which is extremely buoyant. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Underlying developments driving Burger King India's growth isn’t the focus of this broad overview, but, bear in mind that generally a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with Burger King India is its relatively high level of debt. Typically, debt shouldn’t exceed 40% of your equity, which in Burger King India's case is 91%. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on Burger King India, so if you are interested in understanding the company at a deeper level, take a look at Burger King India's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further research:
- Valuation: What is Burger King India worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether Burger King India is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Burger King India’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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