Buy Jubilant FoodWorks; target of Rs 1753: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Jubilant FoodWorks has recommended buy rating on the stock with a target price of Rs 1753 in its research report dated October 22, 2019.

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October 23, 2019 / 14:57 IST

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Prabhudas Lilladher's research report on Jubilant FoodWorks

JUBI's 4.9% SSG (6.5% excluding Split stores) and aceleration in store openings have re-inforced our positive stance on the company. Although higher store openings in existing cities can impact near term SSG, we expect Dominos to emerge stronger play on demand revival given 1) fortressing strategy gains for delivery sales 2) strong brand pull on 2% price incraese in tough environment and 3) improved customer experience and operating efficiency from investments in new store design and equipment. We believe that Dominos brand strength and delivery based model will enable it to wither onslaught of food aggregators/ cloud kitchens. Although input costs in dairy and manpower are rising, current softening in dairy prices and log-out movements in food aggregators will reduce cost/margin pressures for JUBI. We cut our FY20 and FY21 EPS estimate by 4.9% and 1% as we factor in one time charge for reclassification of deferred tax and higher store openings (108 stores in FY20 and 100 in FY21). We estimate mid to high single SSG with 108 new Dominos store openings in FY20 translating to 24.7% PAT CAGR over FY19-22.

Outlook

We value the stock at 40xSept21 EPS and arrive at target price of Rs1753 (Rs1688 earlier on 40xJune21 EPS). Retain BUY.

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