Buy This Large Cap Retail Stock With A Target Price of Rs. 4400: IIFL Securities

The brokerage’s take on Jubilant FoodWorks

IIFL Securities has highlighted in its latest research report that "Jubilant FoodWorks reported results above our estimates with 37% sales growth. SSS growth at 26% on a low base, with sales per store up 26% YoY, the delivery and takeaway channels grew 36.8% and 72.2%, respectively, over pre-Covid levels. However, dine-in was still sluggish and has recovered to 46.9% of 2QFY20. Operational stores were almost at 95%, with a noticeable uptick in demand compensating for the lost operational hours from stores that were closed. An encouraging recovery was seen in order counts, now close to pre-Covid at the system level. Management states that dine-in normalisation will help in this recovery and growth, going forward. While ticket sizes saw a reduction as dine-in opened up, it is still higher than pre-Covid due to increased delivery charges and a higher mix of delivery. The company expects the delivery share to remain higher vs pre-Covid levels, leading to higher ticket sizes on a sustainable basis."

According to the brokerage, the company's "Ebitda margin remained strong at 26% and, going forward, margins should improve on account of positive operating leverage, higher investments behind consumer experience and competitive headwinds could put downward pressure. On gross margin, the company stated that food & commodity inflation would be mitigated by price hikes taken earlier this year, along with productivity improvement in delivery and manpower. Moderation in dairy prices sequentially will also ease margin pressure. While there is still room for further price hikes, the company will treat it as a last resort."

The brokerage has claimed that "While 46 of 55 stores were opened in cities where they were already present, the company also entered 9 new cities. This indicates potential for growth in both, newer locations as well as existing cities like Mumbai, Delhi, Chennai, etc. The company is on track to open 150-175 new stores in FY22. The company is committed to growing Dominoes as a multi-brand and multicountry business, with the potential of opening up to 3,000 Domino's stores across the country over the medium-to-long term. Management indicated encouraging customer response seen in Tier 2-3 and smaller towns this quarter, across the delivery, dine-in and takeaway channels where people wait for new brands to make an entry."

Buy Jubilant FoodWorks Suggests IIFL Securities

IIFL Securities in its research report has noted that "Jubilant FoodWorks (JUBI) reported results above our estimates with 37% sales growth (SSS growth at 26%), as strength in delivery and takeaway (sales up 37% and 72%, respectively vs 2QFY20) offset a muted sluggish dine-in, with 95% stores operational for the quarter. Ebitda margin remained strong at 26% and, going forward, management stated that gains via operating leverage (as dine-in recovers) and productivity improvement along with recent price hikes taken would help sustain margins despite inflationary pressure."

"An encouraging recovery was seen in order counts, now close to pre-Covid levels with ticket sizes declining as dine-in reopens. Ticket sizes should, however, remain higher than pre-Covid levels, as delivery contribution increases on a steady-state basis. The Company is on track to add 150-175 new Domino's outlets in FY22 and plans to ramp up newer formats like Hong's Kitchen outside NCR. This is in line with its goal of becoming a multi-brand/country business, with emphasis on premiumisation and personalisation," further added the brokerage.

Disclaimer

The stock has been picked from the brokerage report of IIFL Securities. 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.