Motilal Oswal
Jubilant Foodworks (Buy)
Target: ₹4,830
CMP: ₹4,150
Jubilant Foodworks FY21 annual report highlights the management’s efforts to stay ahead of its peers and reap the tremendous opportunities in the Indian QSR space. In addition to its delivery and value moat, the company is boosting its technological moat to enhance its lead over its QSR peers and aggregators. Improving its pre-order experience, usage of Hindi and regional languages, setting up of its analytics and insights division are some of the efforts made.
Macro factors favouring delivery are extremely strong: Robust growth in urban and rural internet penetration is likely to be boosted further by the launch of 5G technology. Online ordering is growing strongly, even in smaller centres.
As a result, delivery and takeaway (a clear focus area going forward) will be the key drivers of SSSG in the next few years, even when dine-in recovers. Sustainable sourcing and food safety is increasingly becoming a vital focus area to boost its long-term growth potential.
Given the structural opportunities in the QSR space and Jubilant Foodworks’ dominant positioning, with a proven and profitable model, we expect it to be the key beneficiary of favorable trends (shift towards branded players). We had upgraded our rating to Buy after its Q1 FY22 result.