ICICI Securities research report on Jubilant Foodworks
Key positives in the 2QFY24 result include (1) volume-led revenue growth, (2) continued sequential improvement in LFL ADS, (3) on-track ramping-up of Popeyes with positive consumer feedback (to add 30 stores in FY24), (4) healthy traction in the loyalty program (enrolments up 16% QoQ, 50% revenue share) and (5) transitioning from 4 region structure to 7; this will lead to better agility and sharper execution/regionalisation. That said, we do reckon that the recovery in the dine-in business is uninspiring, while operating margins remained under stress due to negative operating leverage. However, given that all the levers for growth (20-minute delivery, store-re-imagination, loyalty programme, menu regionalization) are in advanced stages of completion, we maintain our positive stance. BUY.
Outlook
We have cut our FY24E and FY25E earnings estimates by ~11% and 3%, modelling revenue / EBITDA / PAT CAGR of 14 / 18 / 27 (%) over FY23-25E. Maintain BUY with a revised DCF-based target price of INR 620 (was INR 590). Key downside risks are raw material costs turning inflationary and increase in competitive intensity.
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