Jubilant FoodWorks extends fall post Q2 results; stock hits 7-month low

The stock was down 10% to Rs 1,070, its lowest level since March 21, 2018, on the BSE in intra-day trade.

Shares of Jubilant FoodWorks, which operates the Domino’s franchise, hit a seven-month low of Rs 1,070 per share, down 10% on the BSE in intra-day trade on Thursday, after a weak management commentary post the September quarter results (Q2FY19).

The stock has fallen 14.5% from its Wednesday’s high of Rs 1,251 after the announcement of results. It was trading at its lowest level since March 21, 2018.

The company in a conference call said the competition (promotions) has intensified significantly.  The demand for delivery manpower from e-commerce players/aggregators is rising and demand environment has been largely unchanged over past 2-3 quarters.

“Apart from the extremely challenging SSSG (same-store sales growth) base from Q3FY19, there are challenges in the form of higher labor costs due to intensifying competition, increased logistics costs on delivery due to higher diesel prices,” Motilal Oswal Securities said in result update.

The company likely addition of 20 stores every quarter (compared to barely any addition over Q3FY18-Q1FY19), likely lower benefits on EBITDA margin from Dunkin EBITDA losses (now - 50bp from -250bp a few quarters ago) and very low operating leverage due to significantly moderating sales growth compared to the recent past – this means that profitability might come under pressure, it added.

Jubilant FoodWorks reported a strong Q2FY19 result led by a solid 20.5% SSSG. The company reported a healthy 60% year-on-year (YoY) growth in net profit. Total revenues grew by 21.3% YoY to Rs 8.8 billion. Ebitda (earnings before interest, tax, depreciation and amortization) margin at 16.6%, improved 250 bps YoY, while flat on sequential basis.

“Going ahead, we believe that the company would post high single-digit SSSG as the base would become unfavorable hereon. In addition, we believe that the margins would remain high, but would decline here on considering increase in number of store addition. Nevertheless, increase in sales volumes would partially mitigate the increase in operational expenses,” analysts at Dolat Capital said in result update.

At 01:37 PM; Jubilant FoodWorks was trading 7.5% lower at Rs 1,104 on the BSE, as compared to 0.62% decline in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 3.94 million equity shares changed hands on the NSE and BSE so far.