Accumulate Jubilant FoodWorks; target of Rs 490: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jubilant FoodWorks

We cut our FY24/FY25 EPS estimates by 21.5/14.9% and rating from Accumulate to Hold led by 1) sustained demand pressures in Pizza Industry amidst rising comeptition 2) poor sales growth with flat YoY dine in sales with 213 higher number of stores 3) poor growth expected increase in inflation due to high prices of cheese and vegetables 3) increase in losses in Popeyes with store expansion. JUBI is looking at driving groth led by 1) 200-225 Dominos and 30-35 Popeyes store additions 2) filling in product gaps with launch of Red Hot pizzas (starting at Rs179) 3) driving consumer traffic with redesigned stores and 4) cheesy rewards loyalty programme. We expect demand and margin pressure to sustain in 2Q with gradual recovery from 3Q led by festival season and cricket world cup in October. Long term QSR opportunity in India remains attractive although near term upside in JUBI seem capped post recent run up in stock price.

Outlook

We estimate 16.3% PAT CAGR over FY23-25 and cut rating to Hold with DCF based target price of Rs490 (Rs515 earlier).