Analysts cut Jubilant Foodworks estimates as Q4 disappoints
Jefferies reduced its target price, same-store sales and earnings estimates on Jubilant Foodworks after the operator of Domino's Pizza and Dunkin' Donuts restaurants missed Q4 street expectations. Kotak Institutional Equities and IDBI Capital among others also have cut their forecast on the stock.
Jefferies reduced its target price on Jubilant Foodworks to Rs 1,045 from Rs 1,119 on Friday, after the operator of Domino's Pizza and Dunkin' Donuts outlets in India reported lower-than-expected fourth quarter results.
The company's same-store sales (sales at stores open for at least one year) at its Domino's Pizza delivery chain rose just 7.7 percent in Q4, compared with 26.3 percent in the year ago quarter. It has also guided for only 10 percent same-store sales growth in the current financial year, sharply lower than 16.2 percent reported in FY13.
Same-store sales growth last quarter was weakest in the last 16 quarters noted Jefferies analysts Rajasa Kakulavarapu and Govindarajan Chellappa.
"Jubilant's Q4 results are reflective of a broader slowdown in consumption. The outlook for FY14 is also fairly muted. Underlying factor cost inflation, on the other hand, continues to run high, impacting profitability in the near term," the analysts said.
The Jefferies analysts cut their earnings per share estimates on Jubilant Foodworks by 8-10 percent and lowered their same-store sales growth forecast for FY14 to 10 percent and for FY15 to 14 percent. They had earlier guided for a 15 percent same-store sales growth for both the years.
Jefferies has a "hold" rating on the stock.
Elsewhere, Kotak Institutional Equities advised investors "sell" the stock and reduced the target price to Rs 900 from Rs 1,000.
"Pizza (and other fast-food items that Jubilant Foodworks has on the menu) consumption has a discretionary nature to it and hence, the company’s same-store sales growth cannot remain immune (forever) to the macro scenario. In addition, the company’s increasing scale and cannibalization-potential-holding store expansion in existing areas of presence need to be factored into any same-store sales growth assumption," it said.
Kotak cut its FY14 and FY15 estimates on the company's revenue (5-7 percent), EBITDA (14 percent), and EPS (24-25 percent).
IDBI Capital downgraded the stock to "hold" from "accumulate" and cut revenue and earnings estimates for FY14 by 7 percent and 19 percent respectively.
Jubilant Foodworks' shares were up 1.1 percent at Rs 1,029.40 on NSE in morning trade. It had hit a 52-week low of Rs 987.60 earlier in the session.