Jubilant Foodworks can touch Rs 700-750: Parmar

Jubilant Foodworks can touch Rs 700-750, says Ajay Parmar, Head-Institutional Research, Emkay Global Financial Services Ltd.

Parmar told CNBC-TV18, "Jubilant Foodworks is a master franchise in India for Dominos. They have 60% market share in Pizza delivery business. The industry itself has got great potential because of the rising income levels, rising urbanization and rise in proportion of young generation people. Right now they have 375 outlets, in the next 3-5 years they can easily add up 70 outlets every year. So this 375 can become 630 by FY15."
He further added, "Apart from that if you look at this company, the eyes of the management is always on the cash generating part of their business. This business itself is generating Rs 20 crore of cash for FY11 and can generate upto Rs 350 crore of cash by FY15."
"They have added one more arm that is Duncan's Donut; here as well the strategy was to look at the profitability. This business has got three year of payback and in the very first year it's going to be into cash breakeven. Now with Rs 120 crore of cash generation, Rs 60 crore will go for Dominos expansion and Rs 30 crore will go for Duncan's. So I believe this business itself is self sustaining business."
"ROE is 48% and it's zero debt company. Another thing I like about this company is that even though stock is expensive at 27 times PE but if you look at the floating stock only 5% is with public. So the good ROE, the lower floating stock of 5% and the cash generating part of the business, I think it all gives me a sense that this business can trade at, at least this level of PE can give you 20-30% of returns. So I am expecting Rs 700-750 of target price in this company."