Jubilant Foodworks, the master franchise for Domino's Pizza in India (Nepal, Sri Lanka and Bangladesh), on January 29 is expected to report double -digit earnings growth YoY for the December quarter with 6 percent rise in same-store-sales growth (SSSG).
Brokerages expect lower tax cost to boost profit by 15-20 percent in Q3FY20. Revenue could rise 11-15 percent year-on-year.
"We model 6.5 percent SSSG (a relatively favourable base versus Q2FY20 to help) along with 28 net store additions of Domino's," said Kotak Institutional Equities which sees profit growth of 20 percent and revenue 15 percent YoY.
In the quick service restaurant (QSR) space, Edelweiss expects Jubilant FoodWorks to clock 6 percent SSSG and remain optimistic on the overall QSR space, owing to its strong EDV offering, menu rejuvenation, listing issues of competitors on the food aggregator platforms and broader tailwind to the industry.
The SSS growth in July-September stood at 4.9 percent and 4.1 percent in April-June period.
Motilal Oswal, which had upgraded the stock to buy (from neutral) after Q2FY20 results, also expects 6 percent SSSG with 12.4 percent increase in revenue and 14.8 percent YoY rise in profit.
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At operating level, brokerages expect around 50 percent YoY growth in Q3FY20 earnings before interest, tax, depreciation and amortisation (EBITDA) due to the impact of IND AS 116. The margin expansion could be around 600-700bps YoY.
"We build in a marginal contraction in gross margins to 75.4 percent (down 20 bps YoY) partly led by inflationary pressures in the overall dairy segment (cheese for Jubilant). Sharp EBITDA expansion essentially reflects Ind-AS 116 accounting impact," said Kotak which sees EBITDA growing 55 percent and margin rising 645bps YoY.
Key things to watch out for would be commentary on demand outlook for QSR, and launches/Hong's Kitchen/promotions.
The stock rallied 21.6 percent during the December quarter.
Motilal Oswal continued to be bullish on the stock and maintained buy call, though the stock rallied 18 percent since the rating upgrade.
"A positive outlook for second half of FY20 despite worsening macros, were encouraging signs. Further, Q4 onwards the company faces a much softer base for SSSG. Finally, the corporate tax cut is expected to free up Rs 45-50 crore annually for JUBI. This additional cash, if invested to grow the business, will help Jubilant Foodworks to consolidate its position in the further in the QSR space.," the brokerage said.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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