Domino's Parent Brand QSR Stock Registered 83% Sales Growth: Top Brokerage Says Buy

Brokerage firm, Ashika has recommended investors to buy the stock of Jubilant Foodworks Ltd. The company has posted a robust performance in Q1FY23. Revenue growth remained strong and ahead of estimates led by a recover in Like-for-Like Growth (non-split stores). The Dine-in and Takeaway channel registered a solid sequential growth while momentum continued in the delivery channel.

Stock To Buy: Target Price

The Current Market Price (CMP) of Jubilant Foodworks Ltd. is Rs. 615. Ashika has estimated a Target Price for the stock at Rs. 710. This stock has the potential to give a 15.44% return, in the upcoming 1 year. It is a large-cap stock with a market capitalization of around Rs. 40,313 crore.

 

Stock Outlook
Current Market Price (CMP)	Rs. 615
Target Price	Rs. 710
Potential 1 year return	15.44%
52 week high share price	Rs. 918
52 week low share price	Rs. 451.20

Financial Result

Revenue grew 41% YoY/7% QoQ at Rs. 1,255 crore Like-for-Like Growth (non-split stores) stood at 28.3% vs 5.8% in Q4FY22, OLO to Delivery Sales at 97.7% vs 97.9% in Q4FY22. Raw material costs remained a challenge for the company, which has impacted its gross margins, however, the company was arrested with cost optimization, and the same is reflected in EBITDA margins. Gross Profit grew 40% YoY/6% QoQ at Rs. 962 crore; Gross margins declined 40 bps YoY/20 bps QoQ at 76.7%. EBITDA grew 43% YoY/5% QoQ at Rs. 304 crore; EBITDA margins grew 40 bps YoY/-40 bps QoQ at 24.2%. Net profit grew 63% YoY/17% QoQ at Rs. 113 crore.

Stock Advantages: Ashika

According to Ashika, "Among channels, dine-in recovery was near pre- Covid levels, while the delivery channel grew sequentially. During the quarter, in Sri Lanka, the company registered system sales growth of 83% and opened 1 new store taking the network strength to 36 stores. In Bangladesh, system sales grew by 49%. The Company entered 12 new cities during the quarter to expand its reach to 349 cities across India. At the current market price (CMP), the scrip is valued at P/E multiple of 55.9x on Bloomberg consensus EPS of Rs. 11."

However, "Any negative impact on Domino's international brand or unfavorable change in royalty structure may impact business operations of Domino's in India. A significant increase in key raw-material prices would impact profitability. Increased competition in the QSR category," remains key risks, the firm says.

Business growth by Domino's and Popeyes

The company continued with its strong store opening momentum and opened 58 new Domino's stores taking the network strength for Domino's in India to 1,625 stores. Additionally, JFL has entered into an exclusive master franchise and development agreement with PLK APAC Pte. Ltd., a subsidiary of Restaurant Brands International, to develop and operate the Popeyes brand. Popeyes is seeing healthy repeat customer growth across stores with high ratings for delivery and dine-in. Also, 2 new restaurants were opened under Popeyes in Q1FY23, the firm informs.

Company Portfolio: Jubilant Foodworks Ltd.

The Indian QSR space given the huge opportunity, is at an inflection point and JFL is expected to see accelerated growth as customers are looking for trusted brands, and shift from unorganized to organized, omni-channel experience. The company is expected to continue with its aggressive store expansion and has actually accelerated its store expansion plans, guiding for 250 Domino's restaurant openings in FY23. Scale-up of JFL's international operations in Sri Lanka & Bangladesh, home-grown brand Hong's Kitchen, Biryani foray Ekdum! and the latest attainment of exclusive franchise rights for Popeyes provides a further runway for growth over the medium to long term.

Disclaimer

The above stock was picked from the brokerage report of Ashika. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.