Jubilant FoodWorks' gains depend on growth uptick, margin expansion

Jubilant FoodWorks beats Q3FY26 expectations, but stock gains depend on sustained same-store sales growth and operating margin expansion

The December quarter (Q3FY26) operational performance of the country’s largest listed quick service restaurant (QSR) player, Jubilant FoodWorks, was better than expectations. While the company continues to outperform peers on like-to-like sales growth, gains for the stock will be dependent on its ability to maintain and improve margins. The stock, which has lost a fifth of its value over the past year, is up about 8 per cent over the past week. It was trading 1.8 per cent lower on Wednesday, given valuation concerns.

 

In line with its business update, revenue growth came in at 12 per cent year-on-year (Y-o-Y) and order growth was at 10.7 per cent. The same-store sales (SSS) growth for Domino’s was at a steady 5 per cent on a high base of 12.5 per cent. The company continues to maintain its outperformance on the SSS front as its peers have reported muted growth on this metric. Jubilant expects to grow its India business of Domino’s by 15 per cent Y-o-Y with SSS growth in the 5–7 per cent range for FY26. The average SSS growth in FY26 so far has been 8.5 per cent, with Q4FY26 also facing a high base of 12.1 per cent.

 

Even as gross margins were lower Y-o-Y, the company surprised the Street on the operating profit margin front. Cost inflation in dairy, oil and flour dented gross margins, while the company tried to offset this with calibrated price hikes, mix improvement and operational efficiencies.

 

Standalone gross margins contracted 20 basis points Y-o-Y to 74.9 per cent, while operating profit (pre-Ind AS) margins were higher by 90 basis points to 13.3 per cent. The gains on the operating front were on account of operating leverage and better store productivity. The company is introducing margin-accretive products and taking price hikes to support gross margins.

 

Analysts led by Devanshu Bansal of Emkay Research point out that the company has undertaken price hikes across a select menu mix which, along with operating leverage and a reduction of margin drag from emerging segments, should help deliver a 200-basis-point margin expansion.

 

The brokerage has a ‘buy’ rating, citing assuring commentary around delivering mid-teen topline growth along with gradual margin gains in the standalone business and continued strong trends in the international business.

 

Prabhudas Lilladher Research expects 150-basis-point expansion over FY26–FY28, led by an increase in average ticket size, supply chain benefits, gains from tech investments and a healthy SSS growth outlook. The brokerage has a ‘buy’ rating and believes that it is best placed in the QSR space to gain from an expected improvement in consumer demand.

 

The delivery channel, which accounts for three-quarters of its pizza franchise, reported revenue growth of 16 per cent over the year-ago quarter. Domino’s India added 75 new stores to its network, rising 12 per cent Y-o-Y and taking the total count to 2,396 stores. The company added 11 new cities in the quarter and total additions over the last nine months have been 217 stores.

 

Its Popeyes network continued its strong momentum, reporting high double-digit SSS growth for the second consecutive quarter. Its total store count, after five additions, stood at 73 and the company plans to hit the 100-store mark by Q1FY27. It plans to scale it up to 250 stores and expects the segment to generate Rs 1,000 crore revenue over the medium term and contribute about 1–1.5 per cent to overall growth.

 

Antique Stock Broking expects revenue growth of 14 per cent and operating profit growth of 23 per cent over the FY25–FY28 period, led by topline momentum. This is expected to be sustained by strong innovative products with great value, a focus on driving growth through an aggressive price-value equation and a gradually improving macroeconomic situation. Near-term profitability, according to analysts led by Abhijeet Kundu of the brokerage, could see improvement despite the increasing salience of value offerings, led by GST reduction and operating leverage.