The stock of Jubilant FoodWorks, the food service company which operates international brands such as Domino’s Pizza, Dunkin’ Donuts and Popeyes in India, fell over 2.7 per cent over the past two days (Thursday and Friday), due to a 70 per cent decline in its consolidated net profit in the fourth quarter of FY23. On Thursday, the stock closed at ₹474.8, down 1.33 per cent over Wednesday’s close on the BSE; on Friday, it closed at ₹468.60, down 1.4 per cent from Thursday. Interestingly, the stock has gone up 8 per cent in the one month since April 19, while it has fallen more than 11 per cent over six months since November 22, 2022.

However, some analysts still see value in this stock as the management has guided for a store addition of 200-225 for Domino’s Pizza and 30-35 Popeyes in India during FY24. They believe that an “improved same-store sales growth (SSSG) and cool-off in raw material inflation” could turn the prospects for the company.

Brokerages such as HDFC Securities, Centrum Broking, Elara Securities, Sharekhan and Motilal Oswal Research are quite bullish on their outlook for the stock, giving it a Buy rating despite the lower-than-expected Q4 FY23 show. “After a steep stock price correction of about 25 per cent from its peak, valuations appear reasonable at ~28x FY25E EV/EBITDA for a business which has ROE superior to quick service restaurant peers and other retail companies,” said a report from Motilal Oswal Research, which reiterated its ‘Buy’ on the stock. The stock had hit a 52-week high of ₹652.20 on October 6, 2022.

Sharekhan expected the company’s brand-wise differentiated strategy, aggressive store additions, improving customer experience on the delivery platform, sustained innovation, and customer-centric offerings to drive growth in the medium-long term. “The stock has corrected by 26 per cent from its high and is 59x/41.5x its FY2024E/FY2025E earnings,” it said in its report, with a ‘Buy’ recommendation.

Underperformance, a concern

However, not all analysts are bullish. “In our view, higher base/elevated dairy inflation shall continue to drive underperformance for JUBI vs peers in FY24. Weak margin exit drives 2-3 per cent cut to our FY25/26 EPS estimates. We maintain our Hold rating due to near-term uncertainty/underperformance,” Emkay Global said in its report.

Meanwhile, Prabhudas Lilladher has cut its ratings from Buy to Accumulate and its FY24/FY25 EPS estimates by 9.5 per cent/8.9 per cent. This is following “tepid demand with current recovery only being seasonal; delayed margin recovery in inflationary environment and heightened competition; increase in initial losses in Popeyes; and sustained high capex guidance of ₹700 crore including Mumbai commissary,” it said in its report.

Related Topics