Sapphire's 4.76% margin trails sector peers despite restaurant additions
Management said Pizza Hut returned to positive 1% same-store sales growth after five quarters, but Sri Lanka faced wage, energy and food-cost pressure.
Filed 24 Jul 2026, 13:18 IST · Sapphire Foods India Ltd (SAPPHIRE)
Key takeaways
- Consolidated operating margin was 4.76%, 11.38 percentage points below the 16.14% median for 22 Consumer Discretionary peers.
- Net profit of Rs 14.02 cr was supported by Rs 5.67 cr of other income, while interest of Rs 31.93 cr and depreciation of Rs 97.36 cr weighed on pre-tax profit.
- The company added 16 KFC restaurants, five Pizza Hut restaurants in India and one Pizza Hut restaurant in Sri Lanka in Q1FY27.
Price around the results
Low operating margin leaves profit sensitive to below-the-line costs
Consolidated operating profit of Rs 42.43 cr translated into a 4.76% operating margin, while interest of Rs 31.93 cr and depreciation of Rs 97.36 cr reduced profit before tax to Rs 16.17 cr. Other income of Rs 5.67 cr was a meaningful support to pre-tax profit, so the Rs 14.02 cr net profit does not come entirely from operations. The 13.27% tax rate also shaped the conversion from pre-tax profit to net profit.
Restaurant additions continued as Pizza Hut returned to positive SSSG
Management said the company added 16 KFC restaurants, five Pizza Hut restaurants in India and one Pizza Hut restaurant in Sri Lanka during Q1FY27. It also said Pizza Hut delivered 1% same-store sales growth after five quarters of decline. For KFC, management said everyday and selective-day value offers remained part of its two-pronged consumer recruitment strategy.
Sri Lankan cost inflation affected operating leverage
Management said Sri Lanka's operating leverage was affected by minimum-wage revisions and higher energy and food costs linked to geopolitical conflict. The comment points to cost pressure as a constraint on the benefit from positive same-store sales growth in that market. Management also said Pizza Hut added seven restaurants in calendar 2026.
The stock reaction was modest despite heavy trading
Sapphire rose 0.24% on the results day, with relative performance of 0.67% and trading volume at 11.57 times the reference level. No reaction-history comparison is available, so the move cannot be judged against the stock's usual post-results pattern. The operating margin was 11.38 percentage points below the 16.14% median among 22 reported Consumer Discretionary peers.
Q1FY27 at a glance
Consolidated figures as filed with NSE — filed ahead of third-party databases, not yet independently cross-checked.
| Line item | Q1FY27 |
|---|---|
| Revenue | ₹891 cr |
| Other income | ₹6 cr |
| Expenses | ₹849 cr |
| Operating profit | ₹42 cr |
| Operating margin (%) | 4.76% |
| Interest | ₹32 cr |
| Depreciation | ₹97 cr |
| Profit before tax | ₹16 cr |
| Tax | ₹2 cr |
| Net profit | ₹14 cr |
| EPS (₹) | ₹0.44 |
Operating margin of 4.76% compares with a Consumer Discretionary sector median of 16.14% across 22 peers that have reported Q1FY27.
How the stock reacted
| Window | Stock | vs NIFTY |
|---|---|---|
| Results day | +0.24% | +0.67% |
Volume on the results session was 11.57× its 20-day average.
What management said
From the company’s own investor presentation. Each point is checked against the source document before it appears here.
This quarter
- The company added 16 KFC restaurants, five Pizza Hut restaurants in India and one Pizza Hut restaurant in Sri Lanka in Q1 FY27.
- Pizza Hut delivered positive same-store sales growth of 1% after five quarters.
Expansion
- Pizza Hut added seven restaurants in calendar 2026.
New initiatives
- KFC is continuing a two-pronged consumer recruitment strategy using everyday and selective-day value offers.
Problems & risks
- Sri Lanka's operating leverage was affected by minimum wage revisions and high energy and food-cost inflation linked to geopolitical conflict.
What to watch
- Whether operating margin moves above 4.76% as restaurant additions scale.
- Whether Pizza Hut sustains positive same-store sales growth after the reported 1% in Q1FY27.
- Whether Sri Lankan wage, energy and food-cost pressure continues to affect operating leverage.