Prabhudas Lilladher's research report on Jubilant FoodWorks
We cut our FY23/FY24/FY25 EPS estimates by 9.0%/9.9%/11.9% on the back of 3-5% lower system average sales/store, 60-70bps lower EBIDTA margins and lower pace of store additions post ~480 store additions over FY21-23. we believe 3Q23 demand pressures are transitionary, however higher competition requires JUBI to increase innovation and consumer value proposition which will limit pricing actions in the near term. While the scalability of Ekdum, Hong’s Kitchen, and Dunkin Donuts remain doubtful, Popeyes is showing encouraging consumer response. We expect more clarity to emerge with regards to store expansion even though it will take a few more years for it to achieve profits. JUBI has significantly underperformed QSR segment and risk-reward seems favorable at 38xFY25 EPS.
Outlook
We believe JUBI’s strength in Pizza market, pick up in demand, and success in Popeyes can change the course over the coming few quarters. We estimate 26.4% PAT CAGR over FY22-25 and assign a DCF-based target price of Rs610 (Rs685 earlier). Retain BUY.
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