Buy Jubilant Foodworks; target of Rs 580: ICICI Securities

ICICI Securities's research report on Jubilant Foodworks

JUBI’s results were soft though encouraging with LFL turning positive to 0.1% (vs negative SSSG for most QSRs) after four quarters led by pick-up in delivery channel (+12% YoY; 8% LFL) primarily due to delivery fee waiver leading to record 30% YoY growth in new customer acquisition while dine-in channel remains under pressure. Operating margins were under pressure due to operating deleverage and higher brand investments. Store expansion rate is healthy at 10% YoY though it has reduced guidance for Domino’s India stores opening to 180 in FY25 vs 200 in FY24. Popeye’s and international business also continued to scale up well with acceleration in store additions. Positively it continues to focus on (1) volume-led growth and market share gains, (2) customer acquisit6ion, (3) expand category and occasion share, (4) aggressive retail expansion in Popeyes, Hong’s Kitchen expansion and DP Eurasia. BUY.

Outlook

We update our earnings estimates with inclusion of DP Eurasia, modelling revenue / EBITDA / PAT CAGR of 29% / 38% / 69% over FY24-26E. Maintain BUY with a revised DCF-based target price of INR 580 (was INR 600). Key downside risks are raw material costs turning inflationary and higher than expected increase in competitive intensity.