Shares of Jubilant Foodworks plunged 14.66 per cent to ₹2,444 on the BSE in intra-deals on Monday, in reaction to the company CEO’s exit, as brokerages cut the price target drastically.
According to a press release by Jubilant FoodWorks (JUBI), Pratik Pota tendered his resignation from the post of CEO, which was accepted by the board on March 11. The move came as a surprise since the Board of Directors, in June 2021, had approved Pota’s re-appointment as the CEO for three years from April 2022 until March 2025.
The stock closed a shade better at ₹2,512.75, down 12.27 per cent from Friday's closing price.
Morgan Stanley downgraded the stock to underweight and cut the price target by a whopping 46 per cent to ₹2,250 from the earlier ₹5,000.
Uncertainty hurts
"We believe the CEO's exit brings uncertainty in these areas in particular: new store expansion - Jubilant had accelerated its pace of network expansion in FY 22 and was expected to continue to do so; Scale-up of non-pizza cuisines - homegrown brands (Ekdum, Hong's Kitchen) are still in the early stage of operations; and the company's strong cost efficiency focus," it said.
According to Morgan Stanley, "We still view JFL as well positioned to play the long-term growth story in organised food, but the sudden change threatens the near-term outlook."
Credit Suisse has changed its outlook to neutral, while reducing the price target to ₹2,900 from ₹3,500; JPMorgan, too, has downgraded the stock to Neutral with a price target of ₹3,000 (₹4,025), while Macquarie has rated it underperform and cut the target to ₹2,150 (₹3,550).
HDFC Securities has maintained its reduce stance with a revised price target of ₹2,400 (₹3,300). "We have seen CEO changes for various other consumer companies in the past, and most changes have been value accretive. However, we remain cautious until the new CEO showcases his execution capability. The implied growth for Jubilant is high with rich valuation, and change in core assumptions will further impact valuations," it said.
Motilal - Most bullish
However, Motilal Oswal Financial maintained its Buy on Jubilant Foodworks with a target price of Rs 3,680. "The resignation of the CEO comes as a negative surprise and we believe the exit of Pota could have an adverse short-term impact on the stock, considering the phenomenal efforts made during his tenure. While he has developed a good second rung, we will have to watch out for his successor and the strategic outlook ahead."
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