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Shares of Jubilant Foodworks plunged 13 percent intraday on Tuesday as investors reacted negatively to the company’s poor results.
The Indian operator of Domino’s Pizza brand posted dismal set of numbers, with profit declining 75.9 percent for the March quarter at Rs 6.7 crore against Rs 27.8 crore year on year. A one-time loss of Rs 12.2 crore had hit the company’s financials as well. The shocker, however, came in terms of the same store sales growth (SSSG), which came in lower at -7.5 percent against analysts’ expectation of around 4 percent.
At 09:19 hrs, Jubilant Foodworks was quoting at Rs 833.95, down Rs 105.35, or 11.22 percent on the BSE. It touched an intraday high of Rs 890.00 and an intraday low of Rs 828.55.
However, the stock found the backing of several analysts, who feel that the worse may largely be over for the company. Many of them, however, cut the target price for the stock.
Brokerages believe that the company may have bottomed in terms of its financials and some even see a gradual revival in the demand and growth. They also hailed cost cut measures undertaken by the company, including closing down a few Domino’s Pizza as well as Dunkin’ Donuts outlets in the country.
Moneycontrol takes a look at what major domestic and global brokerages are highlighting in the stock.
Brokerage: Bank of America Merrill Lynch | Rating: Buy | Target: Rs 1,090
The global research firm observed that the company’s Q4 results were largely a miss. Having said that, it feels, that the worst is likely behind us and the demand may see gradual revival. It also quoted the company’s commentary that demonetisation impact was visible till the first half of March. Analysing its results further, it said that the withdrawal of buy one get one (BOGO) pizza offer has led to 7.5 percent fall in same-store sales. BofAML maintained the view that the new management may now focus on aggressive growth in the medium term and the priority lies in reviving same store sales growth (SSSG).
Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 1,250
This global investment bank too called demonetisation impact and withdrawal of BOGO as the reasons behind weak results. It lowered the earnings estimates for FY17-19 by 14 percent to factor in weak results and higher employee costs. Further, it stated, that it liked the company’s strategy of lowering store opening guidance to 45 from 150 annually earlier.
Brokerage: CLSA | Rating: Buy | Target: Rs 1,250
CLSA appreciated the company’s action which identified areas that needed attention. Having said that it said that the worst ever SSSG managed to shake its confidence in the company’s business model. It highlighted that it had closed 14 Domino’s and 20 Dunkin’ stores in the last fiscal.
Brokerage: Credit Suisse | Rating: Outperform | Target: Rs 1,100
Credit Suisse observed that its focus on cost control is reflecting in the results and that losses in Dunkin Donuts are targeted to be halved in FY18. The global research firm sees Q4 as the bottom and expects a recovery on margins and SSSG hereon. It cut estimates by over 20 percent to build in the resetting of the profit base.
Brokerage: JPMorgan | Rating: Overweight | Target: Rs 1,140
The brokerage firm observed that the company’s Q4 operational performance was below its and Street estimates. It sees downside risk to its FY18/19 earnings forecasts. Having said that, it believes that progress on revamped growth strategy will be the key going forward.
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