Jubilant FoodWorks shares were down 3 percent on February 1 after Motilal Oswal downgraded the stock to 'neutral' from 'buy' as it believes that the current valuation does not capture the full earnings pressure on the company.
"As near-term demand is expected to be soft, we do not see the operating
print improving anytime soon. The backend investments (commissaries in
Bangalore, Mumbai) will further keep the profit before tax margin under pressure, " said the brokerage firm.
Demand challenges in the industry continue to impact growth metrics for Jubilant FoodWorks, said the brokerage firm.
Jubilant FoodWorks reported a weak sales growth of 3 percent YoY to Rs 350 crore in Q3FY24, impacted by like-to-like decline of 2.9 percent. Delivery business was up 6 percent while dine-in contracted by 5 percent in the same period.
The stock was trading 2.39 percent down at Rs 507.15 at 10.58 am on the NSE.
Some positives
The company's management in its earnings conference call said that competition has increased but Domino’s was able to gain market share. And out of 14 pizza chains, which have around 4,000 stores, Jubilant FoodWorks has a 69.7 percent revenue share and a 46.8 percent store share.
Domino’s added 40 new stores and entered 10 new cities in the October-to-December quarter. The store expansion spree for Domino’s and other brands has continued. The company has a store network in 407 cities as of December 31.
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