Buy Jubilant Foodworks; target of Rs 600: ICICI Securities

ICICI Securities research report on Jubilant Foodworks

JUBI’s result continued to be soft, albeit better than peers (-3% LFL vs -9% SSSG for Westlife). It was impacted by continued under-recovery in the dine-in segment (on a low base) while delivery channel outperformed (~+6% LFL – largely driven by benefits of loyalty program, highest ever ticket size over last nine quarters; without any price hike). Downtrading appears to have subsided since last quarter. Margin pressure continued due to subdued recovery in SSSG and rise in re-investment needs. Incremental focus will now be on (1) growth from delivery channel (& dine-in), (2) category development through media spends – to gain occasion share, (3) aggressive Popeyes retail expansion, (4) Hongs Kitchen expansion and (5) consolidation and expansion of DP Eurasia. Maintain BUY.

Outlook

We have cut our FY24E and FY25E EBITDA estimates by ~13% and 9%, as we build margin recovery to be slower than expected (slower than expected SSSG recovery, higher re-investments required in the core and emerging businesses). We model revenue / EBITDA / PAT CAGR of 18 / 26 / 58 (%) over FY24-26E. Maintain BUY with a revised DCF-based target price of INR 600 (was INR 620).