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Geojit Financial Services
Jubilant FoodWorks (Buy)
CMP: ₹1,861.4
Target: ₹2,228
Jubilant FoodWorks (JFL) is a leading quick service restaurant (QSR) company. It owns franchise for Domino’s in India, Nepal, Sri Lanka and Bangladesh and also for Dunkin’ Donuts in India.
Jubilant FoodWorks reported revenue growth of 14.1 per cent y-o-y (+7.2 per cent q-o-q) to ₹1,060 crore for Q3FY20 mainly driven by growth in online sales, launch of new product line of Masala Pizza flavours, and addition of 47 new stores (44 Dominos’s Pizza, 2 Dunkin’ Donuts and 1 Hong’s Kitchen). The performance was aided by Online Ordering (OLO), contributing 87 per cent to delivery sales. EBITDA margin improved 560 bps y-o-y to 23.9 per cent (but largely stable q-o-q), resulted from higher operating efficiency and effective promotions, partially offset by high food and dairy inflation pressures. PAT rose 7.5 per cent y-o-y to ₹104 crore, further aided by lower taxes.
While, the company faces demand, inflation and competition pressures, the expansion of new stores and improvement in operating and profit margins should drive the growth in coming quarters, Hence, we upgrade our rating to a ‘buy’ on the stock with a roll forward target price of ₹2,228 based on 50x FY22E adjusted EPS.
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