Brokerage Places Buy Call On This Multibagger QSR Industry Stock, Sees 40% Potential Upside

Bonanza Portfolio maintains a buy call on stock of Jubilant Foodworks Ltd. (JFL) for a target price of Rs 891 apiece. According to the brokerage's given target price, the stock can surge 40% in 12 months from its current level. JFL is a large-cap restaurant sector stock and market leader in the Quick Service Restaurant (QSR) industry.

JFL is part of the Jubilant Bhartia Group and is one of India's largest food service companies. JFL holds the master franchise rights for Domino's Pizza and Dunkin' Donuts, along with Popeyes which was added in the previous fiscal. The company has launched its first home-grown brand - Hong's Kitchen in the Chinese cuisine segment in India.

JFL has signed a Master Franchise Agreement with Domino's International which provides the company with the exclusive right to develop and operate Domino's pizza delivery stores in India, Nepal, Bangladesh and Sri Lanka.

Stock Outlook & Returns

The current market price of the stock on 06 October stood at Rs 639.20 apiece on NSE. Its 52-week low is Rs 451.20 and 52-week high is Rs 918, respectively. It is a large cap Restaurant sector company having a market cap of Rs 41,794.59 crore. 

In the past 1 week, the stock surged by 5.9%, giving a positive return. Whereas in the past 1 and 3 months, it gave 4.56& and 13.54% positive returns. It gave 18.76% negative return in a year. In the past 3 and 5 years, it has given multibagger returns of 148.06% and 314.15%, respectively. 

JFL has a focused delivery and takeaway business model, which has shown consistent growth since the past 5 years. (11.22% CAGR from FY17-22). 

Maintaining its Leadership status in the QSR industry

JFL is the largest food service brand in the QSR industry with the benefit of being the first mover. The company leads far ahead of its competitors in terms of No. of stores (1,625 in Q1 FY23), market presence (14% market share) and robust delivery model, which further aims to grow up to 3,000 stores in the medium term. While its closest peer - Devyani International has a market share of 7% with a store presence of 1,008 as of Q1 FY23. 

Continued investment and focus on Tech development

The Company's focus remains clear on developing its Digital strengths, as it remains unbeatable in areas of online presence and Digital dominance through its in-house Domino's Pizza Mobile App (30.2 Mn App downloads in FY22). The mobile ordering contribution to OLO sales has jumped from 38% at the end of FY16 to a staggering 97% by FY22. 

Providing Value to customers by creating sought out growth strategies

JFL has never failed to impress as it has created its place in the market by emphasizing on 'Value for Money' philosophy and has strived hard in providing the best quality Pizza's at affordable prices, thus, highlighting its 'Every Day Value' (EDV) strategy. 

Diversifying into new brands and development of own brands

The company is well placed to leverage its position to promote its new brands portfolio of home grown brands in the market-Hong's Kitchen (14 stores), Ekdum! (6 stores) and ChefBoss, along with Dunkin (25 stores) and Popeyes (6 stores) as of Q1 FY23. 

 

International expansion and growth

With its dynamic expansion strategies, the company has made ripples in the international geographies of Sri Lanka and Bangladesh along with DP Eurasia despite the headwinds of deteriorating economic conditions and rising inflation amidst COVID. (Total no. of Stores in Sri Lanka and Bangladesh touched 46 and DP Eurasia standing at 842 as of Q1 FY23).

Initiate Coverage with Buy - Target Price of Rs 891

According to the brokerage firm, strong cost control and management focus on aggressive store additions along with thrust on digital & tech initiatives were key positives providing strong growth outlook. The resultant robust performance in Q1 FY23 led by strong Revenue growth, recovery in LFL growth and positive expectations from the new brands portfolio makes JFL a hot pick. "Sustained delivery demand is also here to stay as we expect a further growth of Revenue/PAT CAGR at 28%/37% respectively as of FY22-25E and ROE/ROCE at 28%/41% FY24E. We initiate coverage with a BUY valuing the stock at 76x (10yr avg. P/E of JFL) CY24E EPS of Rs 11.8 to arrive at our Target Price of Rs 891 with a potential upside of 41%," the brokerage has said.

Disclaimer

The stock has been picked from the brokerage report of Bonanza Portfolio. Greynium Information Technologies, the Author, and the respective Brokerage House are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.