Why Morgan Stanley is Bullish on Coffee Day Enterprises
Coffee Day Enterprises (CDEL) operates a highly optimized and vertically integrated coffee business. In addition, CDEL has invested in select non-coffee businesses that are essentially opportunistic entrepreneurial ventures by the promoter run by independent management teams. The focus for CDEL management is profitable expansion of the domestic coffee business.
Through its subsidiary, Coffee Day Global Limited (CDGL), CDEL runs the largest chain of cafés in India under the Café Coffee Day brand. Its dominance can be gauged by the café footprint, which is ~4X that of the next four competitors combined.
In their base case, they forecast a 510bps F15-F18 gross margin expansion and 430bps EBITDA margin expansion, driving a >20%
EBITDA CAGR. Indeed, our EBITDA margin estimates may prove conservative if cost inflation remains benign and/or coffee volume offtake beats our base case estimate of relatively modest growth.
Sum of the Parts Valuation Target is at Rs332.00 by Morgan Stanley on Coffee Day
