Shares of the popular restaurant chain Barbeque Nation have remained under pressure for the past year. In the past year, the stock has gone down over 40%. However, analysts at Nuvama see the stock making a comeback as discretionary spending and demand pick up.

The Barbeque Nation Analyst: Kapil Jagasia-led analyst team at Nuvama maintained the ‘buy’ rating on the stock but slashed the price target to ₹940 from ₹1,000. The target still indicates a close to 40% upside from the stock’s last closing price of ₹674.85.

The Barbeque Nation Thesis: The brokerage firm in its review note said that the restaurant brand has been facing demand pressures due to lower discretionary consumption spending over the last three quarters which has resulted in lower footfalls.

The analysts highlighted that to deal with this Barbeque Nation offered promotional discounts to consumers in the June quarter which did help volumes in the dine-in and delivery segments grow 20% sequentially despite an overall slowdown. However, higher discounts impacted gross margin, which fell annually and sequentially.

The domestic brokerage pointed out that the company has cut back on most discounts in July and gross margin has reverted to its historical average. The firm added that going forward the restaurant chain’s focus lies on increasing the volume of business from its well-established restaurants, which constitute approximately 70% of its overall restaurant network.

As per the firm, the Ashish Kacholia-backed – he owns a 1.43% stake – company is observing a monthly improvement in demand, leading to revenue growth. The company anticipates that margins and revenue per store will return to normalcy by the second half of the financial year 2023-24 due to festive demand and reduced inflation-related challenges. It is projected that consolidated revenue will experience a compound annual growth rate (CAGR) of around 13% from fiscal year 2023 to 2025.

Price Action: Barbeque Nation’s share price was down 1.28% to trade at ₹666.20 in the early hours of trading on Friday.

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