Hold Jubilant FoodWorks; target of Rs 595: Emkay Global Financial

Emkay Global Financial's research report on Jubilant FoodWorks

JUBI’s Q2 PAT was 10-14% lower than Street/our estimates, led by a 1-3% miss on topline, a 40-70bps miss on EBITDA margin and higher depreciation on stronger store additions at 76 for Domino’s in Q2. The topline miss was owing to a weaker growth in revenue-per-store, and margin miss was on account of higher gross-margin decline of ~200bps, led by elevated prices of cheese. Factoring-in the accelerated expansion and the lower SSG, we largely retain FY24/25E revenue, albeit reduce our EPS estimates by 3-4% due to new-store investments and higher depreciation. The new CEO indicated the need for refining processes vs. complete overhaul. CEO’s focus appears to be on expediting ramp-up of new formats like Popeyes/Hong’s/Ekdum, acquiring/retaining consumers through promotions, loyalty programs & faster deliveries as well as digitizing the back-end.

Outlook

However, we await unfolding of early trends before turning constructive on JUBI; maintain HOLD with Dec-23 TP of Rs595 (based on 48x Dec-24E EPS vs. 49x Sep-24E EPS earlier). Multiple revision is due to 3M rollover.