Sapphire Foods India Ltd (NSE: SAPPHIRE) Q3 2025 Earnings Call dated Feb. 06, 2025
Corporate Participants:
Sanjay Purohit — Chief Executive Officer
Vijay Jain — Chief Financial Officer
Analysts:
Percy Panthaki — Analyst
Avi Mehta — Analyst
Saurabh Kundan — Analyst
Tejash Shah — Analyst
Gaurav Jogani — Analyst
Jaykumar Doshi — Analyst
Priyam Khimawat — Analyst
Dhiraj Mistry — Analyst
Vishal Gutka — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Sapphire Foods Earnings Conference Call for Q3 FY ’25. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should we need assistance during the conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to the management for the opening remarks. Thank you, and over to you, sir.
Sanjay Purohit — Chief Executive Officer
Good afternoon, everybody. My name is Sanjay and I’m the Group CEO for Sapphire Foods and I’m joined as usual by Vijay Jain, who is our CFO. Firstly, apologies for this delay. We were having technical glitches in being able to connect to you all, but we should now be able to start the conference immediately. And we are going to be talking about our quarter three and our Nine-Month consolidated financial highlights. Quarter three FY ’25, Sapphire Foods has delivered a healthy good quarter and the way that I’d like you all to remember it is double-digit everywhere. So we’ve had double-digit revenue growth at about at INR755 crores, 14% revenue growth. We’ve had double-digit growth across all three verticals, KFC, Pizza Hut and Sri Lanka, our adjusted EBITDA growth has been at INR81 crores or 12% growth and we have delivered double-digit adjusted EBITDA margin also of 10.1%, 10.7%. Like I said, all three business verticals have delivered double-digit revenue growth. Restaurant EBITDA increased 9% year-on-year and restaurant EBITDA margin was 15.4%, down by 60 basis-points year-on-year. Consolidated EBITDA of INR140 crores at 18.5% increase year-on-year by-18 by 14%, up 10 basis-points and consolidated PAT of INR12.7 crores or 1.7% and adjusted PAT was INR19.4 crores or 2.6%. In the quarter, we added 54 restaurants taking — we added 54 restaurants taking our total to 963. We added 35 KFC, 16 Pizza Hut stores in India. We added four Pizza Hut and one Taco Bell in Sri Lanka, and we had two closures in Maldives. In — while we closed two stores in in the quarter, the balance two stores have been closed in the month of January and therefore, as we intimidate — as we intimated to you last call, now that we have closed all the four stores in. Let me take you through the KFC details. Our KFC SSG SSSG trajectory improved slightly versus our previous two quarters. SSSG came in as negative 3%. The heartening part was SSTG was 0% in this and our strategy of driving or focusing on value offers on core products is enabling us to get TG momentum. Our recipe for SSSG revival over the short and medium-term revolves around increasing occasions of consumption. Now late-night, for example, nearly 10% of our business in the stores that we operate late-night. We want to drive value on core products. We want to drive product innovations like chicken rolls, burger, and apart from late-night focus on other day-parts like lunch and business days. The brand priorities that I’m speaking about, I’m referring to Slide number 18 remain consistent the activities that we undertake under each of them are slightly different. So the biggest the biggest opportunity on KFC is for us to enhance the fried chicken category relevance, thereby increase the consumer base of KFC consuming people. And that we will do by popularizing our core variety offerings and our taste epic campaign, which is start in this direction, you would have already seen being on-air in January onwards. From a taste — favorable taste perspective, we want to increase frequency of consumption by building day-parts and product innovation. On value, we’ve got now a sharp three-tier value structure in core at 99 individual meal offerings at 149 and then group meals at 399. Or we are accelerating our rollout of digital kiosks on operational excellence. We have made big progress, 98% of our stores on four-plus rating and nearly 80% on Zomato ratings and we have implemented a dynamic kitchen planning tool to improve product availability and reduce wastage. And in the last quarter, we called out that we will give a guidance on further openings. While we have doubled our store count in three years from December ’21, going-forward, we believe that we should be able to continue our current pace of expansion about 70 to 80 stores per year, Vijay
Vijay Jain — Chief Financial Officer
The financial highlights. I’m on Slide number 23. Channel-wise sales contribution, bining and takeaway came at 59% for the quarter. Delivery at 41% is similar to previous two quarters. Slide number 24, the SSIG came in at minus 3%, trend improved over the last two quarters. The ADS was 115,000. This is includes 90 stores which we opened in the last calendar year, that’s 22% store growth. Overall revenue grew by 12%. Gross margin was largely stable and restaurant EBITDA came at 18.2%, drop of 190 basis-points. This was primarily because of the operating deleverage. If you look at Slide number 26, it gives you a four-year and a five-quarter trend. And while SSSG has remained negative for KFC, the brand over the last nine months have delivered double-digit revenue growth and with that reasonable level of profitability as well.
Sanjay Purohit — Chief Executive Officer
Let me now take you to Pizza Hut. Pizza Hut delivered a system sales growth of 10% and positive SSSG of 5% after eight quarters. ADS has remained stable in-line with the previous two quarters at 48 ADS. And our priorities remain as enumerated in slide number 28. We want to drive taste superiority, a differentiated dine-in experience. We continue to improve our delivery experience. Value is important. We will continue to invest high marketing spends behind the brand and that’s now what is what has you know, caused the uplift on the brand from Jan, Feb, March of ’24, and we will continue to be cautious on-store expansion till we see a sight of double-digit store-level EBITDA. The consumer promise is quite simple. It’s a dine-in-led omnichannel customer promise built on superior product and built on great value and great experience. Over to Vijay on the financials.
Vijay Jain — Chief Financial Officer
Slide number 33, dining and takeaway mix came at 50%, so largely 50-50 between dining takeaway and the delivery. The mix has remained similar to the previous two quarters. On SSLG, it was positive 5% with stable ADS of 48,000 same as H1 of FY ’25. Overall revenue grew by 10%, so double-digit growth for the brand. Gross margin largely remained stable and the restaurant EBITDA came at 4.7%, which was 10 basis-points higher than last year for quarter three. 36 — slide number 36 gives you again a four-year and a five-quarter trend. And while the performance has largely remained stable over last six months, as mentioned by Sanjay, we continue to back the brand with additional and increased marketing spends put behind product innovations and.
Sanjay Purohit — Chief Executive Officer
Let me take you through now the Sri Lanka performance. The Sri Lanka business delivered a very strong quarter. In fact, our best quarter after — in after 10 quarters, we’ve delivered double-digit SSSG of 14% and strong double-digit SSTG also. And our focus on operations, product innovation, value strategy has helped deliver superior performance. So our belief is that if we do the right things in ensuring customers get great product, great experience, value, and we are careful with our — we are cautious with our store opening strategy. We get our size of assets right. Even in a — even in a challenging demand environment, once things start to turn, we should get a large proportion of the benefit and that’s exactly what we are seeing in Sri Lanka. The numbers, which I will just talk about.
Vijay Jain — Chief Financial Officer
Slide 41, channel-wise sales contribution, dining and takeaway mix at 63%, similar to previous two quarters, so delivery steady at 37% mix. The SSSG was 14%, backed by double-digit transaction growth. So that was the heartening part of the transaction, double-digit same-store transaction growth. Overall revenue grew by 15% in LTR and 30% in INR. The gross margin was up by 30 basis-points. Restaurant EBITDA came in at 17.8%, which was up by 360 basis-points. If you look at slide number 45, which gives you a full-year and five-quarter trend, this has clearly been the best quarter for us in last 2.5 years and we remain confident of the growth prospects as we move forward. Slide number 46, update on ESG, which we would have given previously as well. So DGSI ratings, we scored 50 and this actually allows us to be ranked number-one amongst all QSR banks in India for second consecutive year. We were ranked number seven amongst global QSR companies, placed in 97th percentile amongst global QSR companies and the only Indian QSR company to publish ESG report under GRI, SASB and BRSR standards for third consecutive year. With this, we can open the session for questions.
Questions and Answers:
Vijay Jain
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone phone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We can start. There’s already a already a queue that has — has been the first question comes from the line of Percy Panthaki from IIFL Securities. Please go-ahead.
Percy Panthaki
Hi, congrats on a good set of numbers. On KFC, the SSSG is still in negative territory. Do you have any visibility or any initial signs of it sort of turning positive? And if so, over what time period do you think this can happen?
Vijay Jain
So again, as you can see, the trajectory has improved over the last two quarters. We had minus 5% in Q1 and minus 8% in Q2. So trajectory has definitely improved. But we would still say the overall consumer sentiment remains soft. While from a point-of-view, because of the base effect, you might see that we will still improve further and as we move into Q4, but we don’t see the environment changing materially any sooner.
Sanjay Purohit
And having said that, in a — for a brand like KFC, you have to look at both SSSG as well as SG, we have still added a substantial number of stores. Our SG at 12% still is very strong.
Percy Panthaki
Got it. Got it, Sanjay. Vijay, because of base effects also, I mean, there are many companies in the QSR business who are reporting SSSG because of base effects. So I think that’s accepted outcome now. So even if it is because of base effects, but do you see that visibility that at least in Q1, it will sort of turn positive.
Vijay Jain
That’s what we hope for because of the base effect. But again, while few companies would have reported positive SSSG this quarter because of the base effect, fortunately for KFC, last year, we did not fall down by much. I think our SSSG last year was minus 2%. So we didn’t have a big advantage of base effect and that’s a positive for us in a way.
Percy Panthaki
Sure. Secondly, just wanted to understand on Sri Lanka, I mean, you had earlier a year or two ago, problems in the economy and sales and margins had fallen and now it is sort of reverting back or maybe on a little bit of a lower base, but sustainably, let’s say, over the next three-year CAGR, what kind of top-line growth do we expect assuming a stable currency?
Vijay Jain
So again, we have called out our medium-term to long-term ambitions. So I think we should be at least aiming for a 15% CAGR — revenue CAGR over there.
Percy Panthaki
And is there a decent amount of store opening opportunity remaining in Sri Lanka now?
Sanjay Purohit
Yeah, there is per se — so typically this 15% might be half-and-half store opening or perhaps slightly higher SSSG and a marginally lower store opening, but the brand — we continue to expand the brand and I think for the next five years at least we can see see visibility of areas where we will open stores.
Vijay Jain
It’s about just getting that the unit economics back there where they were. I think they are already in the right directions. We have been cautious over the last one, one and a half year. If the yield economics continues to remain healthy, I think you can see an increase in our store opening plans.
Sanjay Purohit
I think what was happening when we look at Sri Lanka is a transaction growth. And see with the kind of inflation that happened two years ago, and then it’s taken one year for us to bed down that entire inflation. Today we are again consumers are voting with their wallets and coming back to Pizza Hut, we remain the strongest QSR brand in Sri Lanka.
Percy Panthaki
Right. And my last question again on KFC, assuming that starting from the beginning of FY ’26, you do go into a sort of positive SSG territory. What kind of restaurant operating margins is your targeting? Because I asked because on the higher side, you touched even like ’22 or something like that and on the lower side, it’s been like 17% 18. So what is the kind of margins you would target which are sort of not so high so as to sort of effect sales or encourage competition, but at the same time are respectable enough and acceptable for us in the medium-term.
Vijay Jain
Again first, while we don’t get into a quarter-on-quarter margin conversations over a longer period, we require a 5% SSSG just to take care of the inflation, right? And the current level, the floor is around 18%. So if I were to get an SSSG or flat to positive SSSG, I think that should be the range. And drive a margin expansion from there, it will require a SSAG, which goes beyond 5%.
Percy Panthaki
Got it, got it. Okay. That’s all from me. Thank you.
Sanjay Purohit
Thank you,.
Operator
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference. Please restrict your questions to two each. If you have any follow-up questions, you may rejoin the queue. The next question comes from Avi Mehta from Macquarie. Please go-ahead.
Avi Mehta
Yeah, hi. Just two quick questions. First, have we seen any change in the competitive intensity on-the-ground or in our terms of trade with aggregators in the last few quarters? And two, if you could give us a sense on how do you see the recent announcement in the budget and that benefit panning out in same-store sales growth. Thank you.
Sanjay Purohit
So I don’t — so we are not seeing tangibly any major difference in reduction of tangible reduction in competitive intensity at least for now. So capacity I’m not too sure. I mean, I don’t think capacity is being added also so right now it seems to be a little stable. Having said that, so that is point one.
Avi Mehta
Point two is, sorry, sir, this is across KFC and Pizza Hut both, right, or would you say it’s different in cost?
Sanjay Purohit
This is across QSR, I would say focus KFC, Pizza Hut, burgers right across. And the fact that there is INR1 lakh crores that has been given back to middle-class consumers is only a positive. We are hoping — we are hoping and wondering as to how soon we will see that reflect in consumption, but that can only be a positive.
Avi Mehta
So but your guess is this should flow-through in the next few quarters. Is that a fair expectation to have?
Vijay Jain
That’s a fair hope to have.
Sanjay Purohit
That’s a fair hope to have. But we have not — we have not had any immediate past experience of this. So to say that
Vijay Jain
How should we should trickle-down.
Sanjay Purohit
It should be fair enough.
Avi Mehta
And sir, just a clarification to the earlier participant, what you said does suggest that the pace of recovery is gradual and has not changed materially even as we speak. So it’s more at the same pace status scope.
Sanjay Purohit
Yes.
Avi Mehta
Okay. Thank you very much, sir.
Operator
Thank you. The next question comes from Saurabh from Goldman Sachs. Please go-ahead.
Saurabh Kundan
Yes, thank you for the opportunity. My question is around on Sanjay’s comment on popularizing core offerings menu in KFC. I believe you have been piloting such experiments in some geographies. If you could share your learnings from there on how it impacts frequency or footfall. If you could share any color on that, that would be useful.
Sanjay Purohit
Yeah. So I’ll take two minutes to perhaps explain the thinking behind this and then, so yeah. So the brand today is large-enough that we actually see that there are two types of consumers, one who are brand loyalists and who are aware of all the offerings of the brand. And the second lot will be non-users or infrequent users of the brand who most likely are still aware of the brand, but they haven’t — they use it infrequently. One, while we drive accessibility to such customers, that’s an important enabler. As we scope out the market opportunity for the brand in a largely or in a category that is still underpenetrated, increasing the base of consumers, we believe is the larger opportunity for a brand like KFC. Once you do that over a period of time, you will also increase frequency. And in any case, we’ve got a lot of frequency, increasing initiatives I talked about day-parts and so on. So one of the consumer insights behind what will make an infrequent and non-trier to come to the brand is really to present the brand as it might have been presented perhaps 10 or 15 years ago to refresh that these are the — these five products as we call them internally, these are the best of KFC and enables the consumer to start their — or his or her journey with the brand through the core variety of products. And our core variety products are chicken on the bone, zinga burger, rolls, wings and boneless, which is popcorn and chips. Interestingly, a large portion of infrequent stroke non-tires of the brand don’t even know that we have got a very, very strong boneless portfolio. So that is the entire — that’s the intention and I hope I’ve been clear here. Now we have been running pilots. Those pilots are both from an advertising perspective as well as from ensuring value with core variety. Those are — while I can’t give you specific — and while I can’t give you specifics of what kind of results we’ve had in the pilots, sufficient to say that really this is the way that I think this is one of the important levers that we will use to drive brand growth in the next coming years.
Vijay Jain
Saurab, just to add to that while footfall is getting represented by transaction growth, what we have called out this quarter is that SSG is negative, but transaction growth has been flat. In the previous quarters, even the transaction growth, which was same-store transaction growth was on decline. So sufficient to say that the early results have been encouraging on the value piece.
Saurabh Kundan
Thank you. That was very helpful. So the interpretation here is that eventually this experiment — this pilot actually turns into a full pan-India.
Sanjay Purohit
The campaign that we have just launched. Campaign is saying try the epic core varieties of KFC. So you can see already the expression of what I — what I enumerated as the key driver, we believe in future growth. Already you’re seeing that in our advertising message and yeah.
Saurabh Kundan
All right. One last question. Are there any margin implications of this strategy?
Vijay Jain
So sort of again, again, when we do such experiments or pilots, we typically have revenue upside target. So while there could be a marginal gross margin impact, they typically end-up compensating at a restaurant EBITDA level.
Sanjay Purohit
Yeah, so the — like I said, gross margin is one of the things that we look at. Finally, we look at restaurant EBITDA margin and if we are able to use all of this to drive healthy SSSG, restaurant EBITDA margin will also be — where will get taken care of.
Saurabh Kundan
Got it. Thank you. Thanks a lot. So your earlier guidance said through the previous question that if the SSSG is at a certain level, then 18% is maintained and it goes up if the SSSG is higher than 5%, right? So that is — that guidance remains.
Sanjay Purohit
Yeah. Yeah.
Saurabh Kundan
Thank you. So thank you.
Operator
The next question comes from Tejas Shah from Avendus Spark Institutional Equities. Please go-ahead.
Tejash Shah
Hi, thanks for the opportunity. I joined a bit late,. Just wanted to know what is the new-store expansion guidance for both KFC and Pizard and two associated questions. Some retailers are calling out headwinds pertaining to unsustainable rentals, not in QSR, but in general, so any read there? And what markers you will actually monitor because SSG seems to be now not giving a right lead indicator, what markets you’ll monitor to ramp-up the store expansion?
Sanjay Purohit
Yeah. So right now from a store guidance perspective on KFC, we are saying anywhere between 70 and 80, which has been roughly a pace of expansion over the last three years. We should be able to — we should be able to continue this. On Pizza Hut, again, we’ll be cautious. Perhaps 2025 is what we are looking at. From a rentals perspective, and this is what — we are not seeing any extraordinary pressure on rental.
Vijay Jain
Especially we have a long-term lease period. So our lease period size range anywhere from 18 years to 24 years. So we are not seeing any additional pressure on rental front.
Tejash Shah
No, for new-store expansion,
Vijay Jain
I meant yeah even from a new expansion point-of-view, we are not seeing rentals which have gone off through the route. So I don’t think the trajectory has changed materially or dramatically to Call-IT out. From a markers point-of-view, yes, SSSG would be one important parameters and continues to remain an important parameter. So that along with the ADS as well as the restaurant EBITDA, these are the three typical lines which we look at from a financial perspective. Having said that, they just previously also we have called out that the more important marker which we look at for a new-store expansion is the strike rate and how many stores you opened in the past, how many of them are hitting the required ADS level, whether at the cohort level, they are hitting the ADS mark. That is again a more important marker which we track internally apart from this SSAG and profitability marker.
Tejash Shah
Thanks. Very clear. Second and last question. So you guys are very honest about the base effect of Hut on SSG, which will actually show-up in improvement in numbers. So at least for now, SSG does not seem to be any guidance value even for margin expansion or margin movement. How should we think about SSG margin relationship or should we monitor, as you said, more of an ADS journey to understand how margins will play-out.
Vijay Jain
For Pizza Hut, absolutely true that SSIG may not give you a direct indication on margin. It’s the ADS level. And we called out previously that if it’s in the range of 47,000 48,000, you are at where you are that 5% range, which includes additional marketing spend as well, by the way. If you fall below that, you go towards that breakeven or even loss-making and you move towards 50,000, maybe you are high-single-digit, you need to move towards that 55,000 mark to go towards double-digit. So that’s the range of ADS of at which the various margins are likely to look at. You are right, SSSG after the point may not give you a direct indication on the margins.
Tejash Shah
Very clear. Thanks and all the best for coming quarters. Thank you,.
Operator
Thank you. The next question comes from Gaurav Jogani from JM Financial. Please go-ahead.
Gaurav Jogani
Sir, thank you for taking my question and congratulations on the resilient performance both on the Pizza Hut side and even on the KFC bid. So my first question is with regards to KFC. While we have been having this negative base for some time now, what would be your sense when possibly could we turn positive here? And like you mentioned for the ADS for Pizard, which is a more actually a trackable format. What should we track here in KFC also in terms of margins?
Sanjay Purohit
Sorry, your first question was Pizza Hut, right? Yes, TFC, sir, KFC. So again, as I called out previously, maybe the base effect itself will probably put the brand into a positive territory, but that is not sometimes good enough to drive margins. As I called out, whether we can actually see a not a base effect, genuine increase in the sales, which is ADS. So hopefully, the brand will get into positive territory over the next two quarters.
Gaurav Jogani
Sure. So yeah, so I mean my question
Sanjay Purohit
Was same question? The second question
Gaurav Jogani
Was relating to the same corollary you gave for Pizza Hut that the 47% 48 range would be 5% margins, 50 would be this margins. So similarly, if you can highlight this for the KFC bit as well.
Sanjay Purohit
Again, I called out — so while Pizza Hut, we have called out specifically because over the last two years, there have been significant erosion on our ADS. We were at 62 levels and came down to, 41% 42%. Hence it’s easier to look at that way. On KFC, I would say if we are currently at trending at 18% margin, if we’re able to drive a 5% growth from here, let’s say, next year, then it will take care of the inflation. So at that level of SSSG, our margins should remain stable.
Gaurav Jogani
Stably you mean to say is 18%, right?
Vijay Jain
That is in and around 18% plus/minus.
Gaurav Jogani
Okay. Okay, sure. And sir, my second question is with regards to how should we one look at the impact on the ADS right now. Do you think — is it the impact because of the new-store openings that are happening and they are not scaling up, which is having an impact on the ADS recovery or is it largely you know the footfall or the transaction that has a higher impact? Which one you would accord more in terms of the ADS recovery impact?
Vijay Jain
So it’s SSG is a negative SSSG and negative SSG for over last four quarters or so, which is causing the bigger one. The new-store ADS diluting the overall brand ADS is anyways, if I may use the word budgeted for in a way, it’s anticipated, right, because the new stores would come at anywhere between 75% to 80% of the brand average ADS. The existing stores, if they grew by 5%, 6%, it neutralizes the impact of the new stores, which helps you to maintain the ADS level. Right now, the ADS is dropping because while you’re opening the new stores, your existing stores are not growing by that 5%, 6%. So I would not blame the new-store expansion over here because for new stores, we continue to the strike rates. Those strike rates have been pretty healthy for us. Hence, we continue to expand. So I would say it’s — the drop is more because of the existing stores not delivering the SSSG.
Gaurav Jogani
Sorry, sir. So just to add this other be around, I mean my question was more as in because the system average has also come down and you generally marked that the new stores should be at 75% to 80% of the system average. So are the new stores at least what they were performing earlier, they are at least performing at those levels and it’s just the existing ones
Vijay Jain
To perform at a — are at the reasonable expectation, the payback model which we try and track on, the new stores continue to track on those lines. So our strike rates have been pretty healthy over the last few years and that’s why the expansion continues, the 70 80 stores exposure continues.
Gaurav Jogani
Got it, sir. Thank you for answering my question. That’s it. Thank you.
Operator
Thank you. Next question comes from Jay Doshi from Kotak. Please go-ahead.
Jaykumar Doshi
Yeah. Hi, thanks for the opportunity. The QSR category was impacted more during the slowdown at least when it started. And recently this quarter, obviously on a low-base, but slightly louder, we are barely audible. Okay. Hi. Pizza QSR category was impacted more than the other QSR categories during the slowdown at least in the earlier phase. And now we have seen a strong recovery at least from the market-leader and even your performance has improved. So fundamentally, has anything changed for the category per se? Are you seeing either the competition from fragmentation of category has stopped or is the traffic moving towards national players or anything at all that you sort of can
Sanjay Purohit
So I think in a in a general slowdown, first you see everyone gets impacted. Perhaps the listed category listed brands, you are able to see their you know their results, but I would have thought that everyone especially given the high competitive intensity, everyone would have got impacted. Once everyone gets impacted, then it depends on who is staying in the game and who is doing the right things with the customer to get-out of that situation. And we have got brands that operate single franchise — large number of stores with single-store franchisees. Always in — you find that in a worsening sales situation, in such places the customer experience actually starts to go down. And what we have done is to double down despite the slowdown to double down on customer experience, still ensure great product, great experience, good value, and therefore you might be seeing or therefore we’ll be seeing the gains accruing first to the market-leader and then in some cases to us also.
Jaykumar Doshi
Do you think that this is a more sustainable trend that you know the organized players will probably make a comeback in some form? You’ve seen this in cycles in the past, but you know, based on your experience, do you think that cycle has also played out and now it’s probably likely to play-out in your favor?
Sanjay Purohit
Yeah. So Jay, I’ve said this in the past also that I have great belief that if we continue to do the right things, we will get a larger portion of the gain when the market starts to turn. And in downturns, you have to focus on what you can control. And therefore, if you’ve seen our presentation also, we talk about the brand priorities. Those brand priorities are a combination of what we will do from an advertising perspective, both message as well as quantity of advertising. Now that is not replicable by everyone. Then what will we do to improve operational excellence, how will we look at store expansion. So I think going back to fundamentals is absolutely important and given past experience and also here, I’m quite confident that the brands like KFC and Pizza Hut should do well in — as the market starts to improve.
Jaykumar Doshi
Sure. One question on KFC. I know it’s early days, but in the markets where has scaled-up or at least opened a few stores, are you seeing any divergence in your SSSG performance versus the other areas where they are not present? I mean any impact at all from competition?
Sanjay Purohit
No, nothing at all. And it goes back to the immediate question that you raised. And so first of all, gains accrue to the largest brand. So we have seen that in the pizza category also, first gains accrue to the largest brand, if the largest brand does the right thing. That is number-one. Also, it is important for the number two-brand to differentiate itself clearly from the number-one brand. Others what is the use — so why will consumers go to that number two-brand. Now in Pizza Hut, we are articulating how will we be different and we are also putting in the marketing rupees behind it. And that’s why — and we’ve got a legacy of 2025 years of consumer goodwill. That’s enabling — that will enable the brand. I mean, in the case of KFC and the competitors, I think we have to ask the question, why will a consumer go to the smaller brand, is there anything differentiated that is being offered? And if it isn’t, then that smaller brand will suffer. And this is exactly what is seeing. There is no impact at all on at all on KFC even in-markets where we operate a side-by-side.
Jaykumar Doshi
Very useful. Thank you so much. That’s it from my side. Thanks a lot.
Operator
Thank you, Jay. Thank you. The next question comes from the line of Priyam Kimawat from ValueQuest. Please go-ahead.
Priyam Khimawat
Yeah, hi, sir. In AFCR margins used to be around 19% to 20% levels when we used to achieve an ADS of 125,000 to INR130,000. Now considering the competitive scenario which is there and also considering our ADS has dropped, I believe that 18% margin is what we should assume for the next three, four quarters or you believe that if and when we start achieving that ADS of 125,000, IN 130,000, there is possibility that we go back to the 20% margin levels.
Sanjay Purohit
So look at a current level of ADS and if the SSLG remains in the near-term, let’s say, in the range of 0% to 5%, I think that’s the range of margin to be taken. For us to break-out from this particular margin zone, you require a really high-level of SSSG, which could be towards double-digit. So unless we hit that double-digit SSSG, I think the margins are likely to be in this range.
Priyam Khimawat
Okay. So double-digit SAG is any which way at all task considering the demand scenarily. So 18% 18.5% margin is what we should assume at least for the near-term in this.
Vijay Jain
I would say at 18 plus-minus.
Priyam Khimawat
Got it, got it. Got it. And what would be our capex number for this Nine-Month FY ’25?.
Vijay Jain
So again, we have not called out an overall capex number, but yes, we have called out previously that KFC continues to be in the range of INR2-odd crores per store and Pizza Hut is in the range of INR1.35 crores to INR1.4 crores per store.
Priyam Khimawat
Okay. And next year, any capex number which you would like to call-out on a cumulative basis that 80 stores we opened KFC and 25 odd stores in Pizza.
Vijay Jain
So basis the store guidance which we have given and the first store, we can do the math. But on-top of that, there are always refer cost, the IT investments. So I would like to avoid a capex guidance separately for the year specific. Let us just come out with the annual numbers and that would give you some indication on what kind of overall capex looks like.
Priyam Khimawat
Got it. Got it. And there was a rise in other income in this quarter. Any material reason behind that or it was just regular business activity?
Vijay Jain
Regular or regular? Those are things that is very specific different.
Priyam Khimawat
Got it, got it. Got it. Okay. That’s all from my side. Thanks.
Operator
Thank you. Thank you. Next question comes from Diraj Mistry from Antique. Please go-ahead.
Dhiraj Mistry
Yeah, hi. Congratulations on very good set of numbers. Sorry if I missed out this, but can you tell us like month-on-month, like how was the demand during festival period and after that? And how do you see now we entering into Q4, how do you see that demand has been panning out?
Vijay Jain
So again, we typically don’t give a month-on-month trend. Suffice to say that Q3 was definitely better than the H1, H1, which was minus 5% in-quarter one and minus 8% in-quarter two. Definitely Q3 trended a bit better. And the more heartening part on Q3 in KFC was the transition growth was flat. So while transactions, we saw some transaction decline, which was SSTG same-store transition decline in H1, at least Q3, the trajectory improved and the transitions were flat. We — when we enter into Q4, we still see the consumer demand environment being challenging. So we don’t see a big pickup from a demand perspective on KFC. On Pizza Hut, the SSSG has turned positive. Again, SSTG, which is the same-store transaction growth have also remained positive for Pizza Hut. But this is largely on back of — if you see the base effect, the ADS have remained constant over last nine months. So it does not help really from a margin improvement perspective. What we need actually is the ADS improvement on for us to improve margins from your own?
Dhiraj Mistry
Got it. Got it. And sir, second and last question from my end. So if I look at demand growth for KFC as well as for Pizza Hut across channel delivery, takeaway and dine-in format. Correct me if I’m wrong, that dining channel continues to decline in KFC despite our effort of driving footfall-led growth in doing menu innovations on that, whereas for Pizza Hut, it has been positive 6% roughly, give or take 6%, which has been there. So what is driving this difference between dining channel declining in KFC versus growth in Pizza Hut?
Vijay Jain
So again, first of all, both the brands, the channel performance of delivery has been better than the dining channel performance. It’s just that the — when you’re looking at the numbers for both the brands, Pizza Hut has a huge base effect and KFC doesn’t have that kind of a base effect. That’s why you’re looking at our numbers where one channel has gone positive and other is in decline. But if you look at the relativity for both the brands and I think that’s true for most QSRs, in fact, not most all QSRs where delivery continues to perform better than dining at this point in time. But again, when you look at a long-term, medium to long-term, we don’t think this differential performance is going to remain infinitely there. The dining should come back eventually and all our measures in terms of product innovations and product promotions are focused to get the dining channel back-in positive trajectory.
Dhiraj Mistry
Yes. Just one question related to that. Is there any material difference in terms of margin between the delivery and dine-in channel for both the formats.
Vijay Jain
From a gross margins perspective, no, but from a flow-through, which is a variable contribution margin, the dining definitely is a — has a higher flow-through than delivery because delivery has a cost associated with it. While the dining flow-through fixed-cost remaining fixed, the flow-through every INR100 I sell, the flow-through is significantly higher vis-a-vis the delivery.
Dhiraj Mistry
Got it. Thank you. Thank you very much, sir. Thank you.
Operator
Thank you. The next question comes from Vishal Vitka from HDFC Securities. Please go-ahead.
Vishal Gutka
Hi, team. Excellent set of numbers, sir. I want two questions. First is on anti-US sentiment towards certain brands. Sir, are you seeing those trends mellowing down a bit during the quarter, if you can throw some light on that?
Sanjay Purohit
I don’t think we are able to see either positive moment or negative moment. So I think it is just the same, Vishal.
Vijay Jain
And even when there was an impact, there was an undercurrent impact, we were — we were not able to really quantify that impact what we had on our business, especially because KFC is 95% non-vegetarian. We were not precisely able to quantify. But that there was some impact, but I don’t know whether we have — I would say neutral. I don’t see such positive or negative movement.
Vishal Gutka
Got it. Yes, that is continuous is starting. Yeah. You don’t know where we were, I don’t think it has improved or a lot. Got it. And sir, in case of Visa Hut, any scope for reducing capex per store or OpEx so that we are able to achieve margins despite ADS remaining this range around INR50, INR1,000. So broadly, any scope — any further scope left or we have already achieved optimum possible?
Vijay Jain
If you look at our probably our capex two or three years ago used to be at INR1.5 cR and that itself had come down significantly from a number which used to be INR2 crores several years ago. Yes. Was on back of a 1,200, 1,300 square-foot model. We did introduce a year-ago 1,000 square feet model where there was no-compromise on the front-of-house, which was the covers. It was all about the backward integration and getting the kitchen tighter. So now combination of a 1,000 square feet and a 1,200 square feet, 1,000 square feet typically in a Tier-1 or a metro town where we have enough number of stores where the delivery cycles are higher, you can crunch your back-end storage. So that the capex is low for 1,000 square feet. So a combination of 1,000 crore and 1,200 crores, we are now at 1.35 cr or 1.4 cr that itself is a reduction of 10% over last three years. In an inflationary scenario, I think we have done a really good job of that 1.35 cr. Cutting down it any further would mean you are then compromising on the consumer experience. So I don’t see there is any much room left from a capex reduction point-of-view.
Vishal Gutka
Got it. Got it. Thank you. Wishing you all the best for the future quarters. Thank you.
Sanjay Purohit
Thank you, Vishal.
Operator
Thank you. Yeah. Ladies and gentlemen, we take that as our last question for the day. I now hand the conference over to the management for closing comments.
Sanjay Purohit
Yeah. Thank you very much to everyone who has joined in. Just to reiterate the big messages, we’ve had a healthy good quarter in-quarter three, double-digit revenue growth at a consolidated level and all three business verticals, double-digit adjusted EBITDA growth, double-digit adjusted EBITDA percentage margin also. That’s it from me. We’ll hope — we will hope to see you in a quarter’s time. Thank you very much. Good night. Good evening.
Operator
Thank you. On behalf of Sapphire Foods Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.