Brokers 'overweight' pizza maker Jubilant; but eye earnings call

Moneycontrol BureauAfter a sub-par fourth quarter performance, Jubilant Foodworks’ management call later this evening will be closely watched for demand expectations and same store sales growth (SSSG).The stock had taken a beating last week following the CSE report on cancer causing chemical ingredients in bread, and is yet to recover from the sell-off.The company's quarterly earnings announced Saturday showed a 7 percent decline in net profit to Rs 29.46 crore and a 13 percent rise in revenues to Rs 617 crore.Brokers tracking the stock say muted same store growth over the last few quarters and expensive valuations are weighing down the stock price.At current price, Jubilant Foodworks shares are trading nearly 45 percent below the peak seen in July last year.Jubilant’s gross margins improved 120 basis points during the March quarter, and SSSG rose 160 basis points quarter on-on-quarter. But broking firm Morgan Stanley has pointed out that volumes have actually fallen, and this has pulled down operating profit margins by 80 basis points.“SSSG needs to be viewed in context of the effective 7 percent weighted average price hike for the quarter, which implies that Dominos' volumes declined by around 4 percent for the quarter,” says the Morgan Stanley report terming it as a key disappointment.The broking firm has an ‘overweight’ rating on the stock.Broking firm firm Equirus says the SSSG has been disappointing despite the promotional offers during the quarter.“We consider the JFL business model to be of a high quality, however expensive valuation coupled with dampened consumer sentiments will weigh on the stock price,” the Equirus report says.Already, Jubilant Foodworks has toned down its store expansion plans for this year, given tepid consumer sentiment and the fiercely competitive landscape.On the positive side, the company’s share of online orders as a percentage of total orders has risen to 41 percent in the March quarter compared to 29 percent in the September quarter.“The rising digital footprint of Dominos will be a source of competitive advantage for the business, we believe,” says the Morgan Stanley report.A note by JP Morgan says it will be focusing on the following points during the management concall:a) Underlying demand trends and expectations on SSSG recovery b) Promotional/Competitive intensity in QSR segment c) Expectations on margins d) Promoter shareholding trends and e) Incremental Capex plans.JP Morgan has an 'overweight' rating on the stock, but has said it will review estimates after the conference call.