Neutral Jubilant FoodWorks; target of Rs 625: Motilal Oswal

Motilal Oswal's research report on Jubilant FoodWorks

Jubilant Foodworks (JUBI) reported standalone sales growth of 9% YoY to INR14.7b (in line), led by 20% order growth. LFL grew 2.8% (in line). The delivery business performed well, growing 16% YoY; the business raised its share to 70%. Dine-in revenue, however, dipped 6% YoY. Waving of delivery charges has been shifting the dine-in demand to delivery. Domino’s India has added 50 new stores and entered 20 new cities in 2Q. The store expansion spree for Domino’s and other brands will continue to broaden the customer reach and gain market share. Standalone gross margin was down marginally (-30bp YoY to 76.1%), and EBITDA margin contracted 150bp YoY to 19.4%. The contraction is due to higher investments in technology, supply chain enhancements, and negative operating leverage. Additionally, the company intensified its value proposition by offering free delivery. JUBI emphasized that customer retention and acquisition are critical priorities in the current demand environment.

Outlook

The QSR industry is still reeling under pressure due to growth metrics-led weakness on unit economics. Outperformance of delivery demand has supported healthy traffic growth for Jubilant. The growth recovery still looks more gradual, and operating margin would see slower recovery. We reiterate our Neutral rating on the stock with a TP of INR625.

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