Neutral Jubilant Foodworks; target of Rs 700: Motilal Oswal

Motilal Oswal's research report on Jubilant Foodworks

Demand has remained steady but has yet to show material pickup. JUBI expects demand recovery to begin from 3QFY26, supported by GST reforms. Moreover, strong participation in recent sale events such as Big Billion Days, etc., indicates a positive consumer spending momentum. The GST 2.0-driven relief is likely to boost disposable incomes, benefiting discretionary categories such as QSR. JUBI believes that there is ample underlying demand, and the right combination of location, pricing, and value will be a key enabler to unlock growth, mainly in rural markets. That said, JUBI continues to actively invest in its products and brands to stimulate growth (advertising in major events like the Asia Cup Cricket tournament). JUBI’s store addition strategy varies by location. For competitive large metros, where delivery accounts for ~70% of business, the focus is on differentiation through faster delivery times. Thus, JUBI in these markets densifies their presence via smaller-format stores (800-850 sq ft). In smaller towns, where the dine-in and delivery split is closer to 50:50, the strategy centers on the right product proposition, pricing, and overcoming supply-side constraints, along with a bigger store size (1,500-1,600 sq ft).

Outlook

We remain constructive on the business franchise and higher orientation for growth. However, given the expensive valuations, we reiterate our Neutral rating on the stock with a TP of INR700, valuing the Indian business at 35x EV/EBITDA (pre-IND AS) and the International business at 15x EV/EBITDA on Sep’27E.