JFL's Q1FY21 results were below our estimate, with -61.4% same store sales growth (SSSG). Though the lock down impacted performance significantly during Q1, the company was able to recover 69.8/84.6% of the sales during July/August'20. We believe that the delivery business would gain higher traction compared to dine in in the near term. The company has introduced delivery charges which is likely to mitigate impact of increased discounts and help improve margins. JFL would close down 105 Domino stores which are not profitable (>2/3rd contribution of dine-in). We believe that this would help improve margins significantly. Sri Lanka business registered strong recovery while Bangladesh remained impacted due to higher contribution of dine-in.
OutlookWe have revised our FY21E and FY22E EPS estimates to Rs -2.9 and Rs 34.0 (+9.2%) respectively, to factor in Q1 performance. Considering rich valuations, we maintain Reduce with TP of Rs 2040 (60x FY22E EPS). Buy on dips.
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