The stock of Jubilant Foodworks Ltd. have hit a 3-year high today, up by 1.89 percent, following latest outlook by brokerage firm reports. It is currently trading at Rs 753.20, and trading volume is currently at 1,610,760 shares.
In a report by Kotak Securities, the brokerage firm highlighted that Jubilant is doubling down on its core brand, Domino's, prioritising volume growth while maintaining a focus on gradual margin expansion.
The report further emphasised that Popeyes, another key brand for Jubilant, is undergoing a recalibration of its store expansion model with a strong emphasis on profitability. Kotak expects Domino's to accelerate its same-store sales growth in the second half of the year, leading to an upward revision of revenue forecasts and a target price increase to Rs 690 per share.
Jefferies also issued a 'High Conviction Buy' rating for Jubilant Food with a target price of Rs 1,000 per share. The research firm anticipates an improvement in the company's outlook, particularly in same-store sales, which are expected to grow in the mid to high single-digit range. Additionally, Jefferies believes that Jubilant Food's margins have reached their lowest point in early 2024 and are poised for further improvement.
HDFC Bank acknowledged the challenges facing the pizza category, including price sensitivity, intense competition from regional and local players, and inflation. Thus, leading to increased downgrading to other QSR offerings or value pizza options due to the higher average order value of pizza (Rs 450-500). The lack of significant product innovation (e.g., cheese burst pizza) has also hindered same-store sales growth. Yet, significant steps to address these challenges through value offerings and innovative product launches has been quite a shield for Jubilant, says the report.
Based on these efforts, HDFC Bank expects Jubilant to report strong operational performance in FY25, with SSSG recovery and cost optimisation measures driving margin improvement. The report maintains a 'high-conviction' stance on Jubilant with a target price of Rs 690.
Kotak and HDFC expect margin recovery to be gradual due to factors like continued investments and competitive pressures, whereas Jefferies appears more optimistic on the pace of margin improvement.
In contrast, Kotak Securities, while acknowledging Domino's India's potential for growth with an expected acceleration in SSG/LFL to 9 to 10 percent in Q3 of FY 2025 (from 2 to 3 percent in H1 of 2024), expresses concern over Jubilant's expensive valuation.
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