Goldring revises downward target price for RO restaurant operator Sphera

Romanian brokerage house Goldring reviseddownward the target price for the restaurant operator Sphera Franchise Group (BVB: SFG) to RON 1480-15.77 over the next 12 months, from RON 15.96-17.50 after the company published disappointing Q1 results and as a result of the inflationary pressures.

In terms of revenue, Goldring sees Sphera Franchise Group on an upward trend, registering an increase of approximately 31.8% compared to sales in the first quarter of 2021.

The increase in expenditures was mainly determined by the increase in raw material costs (+ 40.7%) due to the increase in poultry prices, energy costs, but also the general inflationary environment.

Due to the removal of the restrictions imposed by the health crisis, the renegotiation of rents was difficult, leading to an increase in rental costs by about 30.3% compared to the first quarter of 2021.

Other categories of expenses that increased are those related to royalties (+ 32.8%), advertising (+ 53.7%), depreciation (+ 11.6%) and other operating expenses (+ 44.4%).

As restaurant spending rose faster than the revenue, by 39% compared to the first quarter of 2021, the restaurant operating income fell below analysts' expectations by approximately 58.4% compared to Q1 2021.

Although part of the costs was passed on to consumers by increasing the prices of the products sold, further price increases are still forecast to rebalance the operating result.

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