Jubilant FoodWorks rallies 25% in three weeks; hits new high on BSE

Analysts believe Jubliant FoodWorks aggression towards store opening and increase investment towards digital infrastructure will allow the company to emerge stronger from the pandemic.

Shares of Jubilant FoodWorks (JFL) hit a new high of Rs 3,842, up 4 per cent on the BSE in intra-day trade on Tuesday on expectation of a strong growth outlook. In the past three weeks, the stock of this quick service restaurant (QSR) company has rallied 25 per cent after reported a good set of numbers for the quarter ended June 2021 (Q1FY22). IN the process, the counter has managed to surpass its previous high of Rs 3,829.10 hit on August 3, 2021.

JFL is India’s largest foodservice company. Its Domino’s Pizza franchise extends across a network of 1,380 restaurants in 298 cities. The Company has the exclusive rights to develop and operate Domino’s Pizza brand in India, Sri Lanka, Bangladesh and Nepal. It also enjoys exclusive rights to develop and operate Dunkin’ Donuts restaurants in India. JFL has ventured into the Chinese cuisine segment with its first owned restaurant brand ‘Hong’s Kitchen’.

For Q1FY21, JFL reported a consolidated net profit of Rs 69.06 crore in the first quarter ended June 30, aided by higher revenues despite the second wave of Covid-19 disrupting operations. It had posted a consolidated net loss of Rs 74.47 crore in the same quarter last fiscal. Ebitda (earnings before interest, taxes, depreciation, and amortization) margins remained unchanged at 24.1 per cent in Q1FY22 against 24.3 per cent in Q4FY21.

Its revenue from operations in the first quarter stood at Rs 893.19 crore as compared to Rs 388.41 crore in the corresponding period last year when operations were also disrupted by the outbreak of the pandemic. With vaccinations well underway, the management believes that the worst is behind us and we are confident of delivering strong, sustained growth in the periods ahead.

Analysts at Prabhudas Lilladher remain constructive on JFL given increased store opening guidance of 150-170 Domino's stores with a medium-term potential of 3000 stores, lower competition given Covid led shakeout, increased investment in digital infrastructure to emerge as a food tech company and ability to capitalize on increasing convenience sales given strong digital/delivery network.

The brokerage firm believes JFL’s aggression towards store opening and increase investment towards digital infrastructure will allow JFL to emerge stronger from the pandemic.

“Store addition for Domino’s was low (20 new stores) in Q1 due to lockdowns. But JFL’s expansion plan is aggressive, with a target of 150-175 new stores in FY22. Management is upbeat about digital and tech initiatives aimed at becoming a food tech powerhouse. JFL offers a strong growth outlook with solid expansion plans and increased investments in digital and tech initiatives, which can further strengthen leadership and offer efficiency gains ahead,” analysts at Emkay Global Financial Services said in a recent note.