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Last Updated : May 24, 2016 08:34 PM IST | Source: Moneycontrol.com

Toxic bread! Is Jubilant FoodWorks worth buy now?

SP Tulsian has a negative bias on the stock. According to him, PE multiple allotted to the stock are too high and its performance has been stagnant for past five years and stock performance has been laggard. "This is a fancied stock of institutional investors," he says in an interview to CNBC-TV18.

 
 
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As shares of Jubilant FoodWorks fell over 12 percent intraday on Tuesday, concerns persist over toxic levels in bread. According to a CSE report, nearly 84 percent of 38 commonly available brands of pre-packaged breads including pav and buns, tested positive for potassium bromate and potassium iodate, banned in many countries as they are listed as "hazardous" for public health.


However, bread making companies have denied using potassium bromate or potassium iodate. In an interview to CNBC-TV18, Jubilant FoodWorks has said that the company uses ingredients that are approved by FSSAI and flour used is not treated with potassium bromate or potassium iodate.

So, Jubilant FoodWorks worth a buy?

Close

Analyst SP Tulsian has a negative bias on the stock. According to him, PE multiple allotted to the stock are too high and its performance has been stagnant for past five years and stock performance has been laggard. "This is a fancied stock of institutional investors," he says in an interview to CNBC-TV18.


Analyst Prakash Diwan is quite positive on the stock suggesting to use the dip as an entry point for long term. "At this valuation there is not much to lose. In fact this is an opportunity for people to get in and create some long term positions in their portfolio using these kind of business models which will be difficult to replicate for anybody who comes in," he elaborates.


However, Diwan agrees that its valuation is 'over fancied, overdone' in terms of attractiveness. He says that the bread toxic issue is not a stock specific but company specific problem which means that when there are such issues the ability of these companies to pass back whatever changes would result into cost escalation or changes in pricing would be to consumer for sure.


There is another overhang on the stock as promoter of the company, Jubilant Consumer offloaded 3.6 percent stake  for over Rs 303 crore through an open market transaction.  Jubliant FoodWorks operates Domino's Pizza and Dunkin Donuts chains. The company will announce its January-March results on May 28.

At 16:00 hrs Jubilant Foodworks was quoting at Rs 1,063.00, down Rs 49.45, or 4.45 percent on the BSE.

First Published on May 24, 2016 05:32 pm
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