Shares of Jubilant FoodWorks, which operates Domino's pizza chain and Popeyes, slipped more than 2 percent to Rs 433 on March 13 as brokerages gave a mixed response to the company's recent acquisition of Turkey (DP Eurasia) and Bangladesh businesses.
Analysts were cautious on the company's rising debt-book as they intend to expand Domino's and Popeyes outlets in India.
Analysts at CLSA shared a "sell" rating on the counter, with a target price of Rs 439 a share, saying that the overall profitability has been impacted by huge debt. "The currency risk as cash-flows in Turkish lira and debt in euros," the brokerage firm said.
Motilal Oswal was "'neutral" on the stock, sharing a target price of Rs 480, saying recovery of India business is be critical for the counter's performance. "We value the India business at 55x P/E and international business at 35x P/E on FY26E," its analysts said.
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According to financial metrics provided by the company, the standalone profit-after-tax (PAT) was Rs 260 crore in CY23, while international business (DP Eurasia, Bangladesh, Sri Lanka) combined contributed Rs 140 crore to PAT in CY23. After adjusting the interest cost, PAT for its international business should be around Rs 100 crore.
Jubilant FoodWorks expects higher growth and better profitability for Domino’s Turkey due to its fast-growing economy, potential for margin expansion led by lower rentals, absence of overhang from loss-making Russian operations, scalable and straightforward asset-light business model, and an underpenetrated market.
As of CY23, Domino's Turkey had 690 stores, which may prop up to 1,250 in the medium-term. The company also aims to tap into the thriving coffee market in Turkey through its 'COFFY' stores, leveraging high coffee consumption in the country, particularly in the absence of bars or pubs.
On the other hand, Domino’s is the second biggest player in the QSR market in Bangladesh after KFC. Currently, it operates 26 stores with plans to expand to 200 in the medium term.
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Analysts at Elara Securities shared an "accumulate" rating on Jubilant FoodWorks, with a target price of Rs 500, saying their its guidance is strong, with a medium-term goal of 3,000 Domino's and 100 Popeyes stores.
"We believe reduced competitive intensity in Pizza category, higher growth in Popeyes, better profitability, and high free cashflow will be potential catalysts to driving upgrades in the medium-to-long term," the brokerage firm added.
At 12.53 pm, the stock was trading at RS 436.40 on NSE, down 1.93 percent from the previous close.
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