Jubilant Food dives 8% on CEO Kaul's exit: How low can it fall?

What is also surprising is that there have also been other changes including swap of business heads between the two brands. They had swapped roles of COO, Dunkin’ Donuts India with the COO of Domino’s Pizza India earlier this year in April. The latter has shifted to Dunkin’ Donuts India as CEO.

Citi says top management reshuffle suggests some major tweaks in the business, strategy, expansion plans.

According to Citi, now pricing, pace of store expansion and cost / overhead management in the context of the lower SSS regime – as competition remains high are key. “In a space getting increasingly crowded, margins and market share are increasingly binary outcomes, and we remain sellers until the share price reflects this outcome,” it says in a note.

Nomura has a reduce rating with a target price of Rs 900 per share stating the exits does not augur well for the company as the transition becomes even more difficult, given recent weakness in SSSG for the industry, coupled with the issues being faced by Dunkin’ Donuts.

Rahul Arora, CEO, Nirmal Bang prefers Westlife (MCDonald's franchise owner) to Jubilant FoodWorks. He says Jubilant FoodWorks has halved its return ratios in the last three years and not more than 30x FY17 price to equity is seen. He expects earnings per share (EPS) of around Rs 16-17 in FY17 but feels high valuations of Jubilant FoodWorks a concern.  The brokerage firm has an underperform rating on Jubilant Food as negatives are getting factored in.

PhillipCapital sees further 10 percent downside in Jubilant FoodWorks. It says that reducing promoter holding of Jubilant Food is not a comforting sign. From 61.75 percent in June 2010, promoters holding has reduced to 45.04 percent in 2016.“Venturing into Dunkin Donuts, rapid expansion of stores wasn’t a good strategy in hindsight. FY17 EPS is expected to be flat, FY18 EPS could be around Rs 23-24,” Naveen Kulkarni of PhillipCapital says in an interview to CNBC-TV18. However,  there are few analysts who are still betting on the stock. CLSA has a buy rating but says the stock will be under pressure in near-term as departure of two key members raises several concerns.

Bank of America Merrill Lynch maintains buy call with target at Rs 1320. It says long-term investment thesis remains intact and it should continue its renewed focus on targeting volume-led growth. However, it adds that the adverse impact on employee morale is likely to be restricted, given Jubilant is a store-driven organisation and its systems are based on those designed by the brand owners Dominos/Dunkin, hence, are robust. “Accordingly, we maintain our view that Jubilant will continue its renewed focus on targeting volume-led growth through an emphasis on economically-priced innovations,” it says.

BoAML is optimistic that the company’s competitive leads are likely to be sustained,given its widest reach in tier-2/3 cities, leadership in the delivery segment,especially in metros, proven supply chain and strong balance sheet.

Morgan Stanley is overweight on the stock with target at Rs 1450 but expects stock to react negatively.

Soon after Jubilant FoodWorks Q1 results, Deustche Bank had said that its decision of moderate store expansion reflectslack of revenue visibility, likely market share loss and consumer behaviour changes (shift away from pizza). It opened only 23 new Domino's stores in Q1, lowest in five years.

It also added that Jubilant is not ramping up delivery boys, an indication of its muted outlook on same-store volume growth.

Jubilant Foodworks reported revenue, EBITDA and adjusted PAT growth of 7 percent, (-) 14 percent and (-) 31 percent in Q1. Its Q1 operating margins dropped 230 basis points (bps) in the domestic business with a same-stores-sales growth (SSSG) decline of 3.2 percent YoY. Its Q1 EBITDA margin at 9.5 percent is the lowest since the IPO in FY10.

At 12:45 hrs Jubilant Foodworks was quoting at Rs 940.00, down Rs 65.25, or 6.49 percent on the BSE.

Posted by Nasrin SultanaFollow @NasrinzStory