Buy Jubilant FoodWorks; target of Rs 610: Prabhudas Lilladher

Prabhudas Lilladher's research report on Jubilant FoodWorks

Jubilant Foodworks is entering Chennai market with Popeyes after opening 12 stores in Bengaluru in past 3 quarters (4/6/8/12 stores in 4Q22/1Q23 /2Q23/ YTD FY23). Popeyes operates in the fried chicken category, which is growing and well accepted. It has limited competition with KFC being there since 1995 and has seen recent entry of McDonalds. We believe fried chicken is a large category and more players will help expand the category. Popeyes, which opened its first store in Bengaluru, found acceptance amongst the likes of KFC & McDonald’s. Since then, Popeyes has gained wider consumer acceptance on the back of differentiated flavour profile providing strong repeat rates (30%+) establishing store economics. With guidance of 20-30 Popeyes stores in FY23, fast scale up can fill in the void of a second large brand in the portfolio of JUBI as earlier global brand launch of Dunkin Donuts failed due to limited acceptance of donuts and it being 5/6th player to enter a crowded category in coffee. We believe faster scale up of Popeyes can be a trigger for the stock.

Outlook

We estimate 26.4% PAT CAGR over FY22-25 and assign a DCF-based target price of Rs610 (unchanged). The stock trades at 37x FY25 EPS of Rs13.6. Maintain BUY.