Jubilant FoodWorks: FIIs still pie-eyed for pizza seller

Shares gain over 27% since their last month's low; raise holding for 12th straight quarter

Foreign institutional investors (FIIs) have defied brokerages’ downgrade calls on India’s largest organised pizza seller, Jubilant FoodWorks. For the twelfth quarter in a row, they continued to raise their holding, 44 per cent as on 30 June.

This day last month, shares of Jubilant FoodWorks, which operates the Domino’s Pizza brand, were at a 52-week low. After fourth quarter results, the stock came under pressure and struggled to reach the Rs 1,000 mark it had been holding on to for more than a year.

Brokerages rushed to downgrade the stock and a majority slashed the target to Rs 900. Some participants set targets at Rs 700. Jefferies cut target to Rs 1,045 from Rs 1,119, while Kotak Institutional Equities advised clients to sell with a target reduced to Rs 900 from Rs 1,000. But the counter did not crash further. It bounced back and is trading 27 per cent higher at Rs 1,182.4 since. FIIs stepped in again . Their holding went up 2.4 per cent in April-June.

According to the the Bombay Stock Exchange, FIIs’ holding has doubled since listing (February 2010), when it was 21.09 per cent. Domestic institutional investors’ holding is 39 basis points. Most domestic fund managers had vacated the stock a long time back, when it had galloped several times in a few months of its listing. Shares, offered at Rs 145, gave a return of 58 per cent on the debut day. Fund managers say when stock crossed Rs 450, they chose to sell. They were wary of abnormally higher valuations for a company dependent on consumers' discretionary spending, never realising the stock would go three times higher.

In May, when Jubilant FoodWorks posted a 13 per cent sequential decline in net profit for the quarter ended March at Rs 32.7 crore, brokerage firms were quick to cut targets. What further worried market participants was the lowest same-store sales (SSS) growth in 16 quarters, at 7.7 per cent in Q4.

Another factor which made experts jittery was the company’s forecast of 10 per cent SSS growth in FY14, far lower than FY13’s at 16.2 per cent.

The company is a part of Jubilant Bhartia Group. It operates the Domino’s Pizza brand with the exclusive rights for India, Nepal, Bangladesh and Sri Lanka. As on March, it had 576 pizza stores and 62 per cent of the organised pizza market and 70 per cent in the pizza home delivery segment in the country.

On the BSE, the shares closed at Rs 1,182.40 on Thursday, up Rs 41 or 3.6 per cent. The company is holding its annual general meet early next month.