Stock To Buy: Reported 12.9% YoY Sales Growth, Buy This Stock For 23% Returns, Says Motilal Oswal

Motilal Oswal Financial Services, the Brokerage firm, has suggested investors buy the stocks of Jubilant FoodWorks for a target price of Rs 680/share. The company holds the Domino's Pizza franchise and two international brands. Recently, the company appointed a new CEO & MD with effect from September 2022. Commenting on the new appointment, the brokerage has said, the experience of the new CEO from Amazon India will further augment Jubilant FoodWorks's clear leadership on the technology front.

Stock Overview - CMP, Target Price, Returns, 52 Week Low & High

Today, the stock opened at Rs 550.95, the same as the previous close. The stocks are trading at the current market price (CMP) of Rs 555.50, after gaining 0.83%. The CMP and the given Target price by the brokerage, it has the potential to gain 23%. In the last 1 year, the stocks witnessed a downfall of around 11%. It has touched the 52 week low at Rs 451.20 last month on 12th May, on the other hand, its 52 week high is 918, touched on 18 October 2021.

Jubilant FoodWorks declared an in line 4QFY22. The management indicated in the post-earnings call that: a) price increases have been absorbed; b) commodity and fuel costs have stabilized and hence, there may be no further need to raise prices, c) there seems to be no concern on staff and lease rental costs at present, and d) all of this gives the management confidence in opening 250 Domino's stores in FY23 (~15% of its FY22 store base).

Jubilant FoodWorks declared an in line 4QFY22

According to the brokerage, "Jubilant FoodWorks reported a sales growth of 12.9% YoY at Rs 11.6b (in line). EBITDA grew 16.2% YoY to Rs 2.9b (in line). Adjusted PAT grew by 11.7% YoY to Rs 1.2b (in line). Like-for-Like (LFL) growth stood at 5.8% YoY (est. 6.5%). Jubilant FoodWorks opened 80 new (highest ever) Domino's Pizza stores and closed eight stores, taking its total count to 1,567 stores at the end of 4QFY22. It closed a store of Dunkin' Donuts, taking its total store count to 28 in 4QFY22. It added two restaurants - Hong's Kitchen and Ekdum! (combined), taking the total count of the two brands to 24. Gross margin fell 60bp YoY to 76.9%. Lower staff cost (-230bp YoY) and higher other expenses (+100bp YoY) led to a 70bp YoY expansion in EBITDA margin to 25% (est. 26%)."

Appointment of Mr Sameer Khetarpal as CEO & MD

The appointment will be with effect from Sep'22 for a five-year period. He is known to solve business problems through technology and by forming partnerships. Building on JUBI's existing digital backbone will be one of the key focus areas for the new CEO. He has 25 years of experience in sectors like e-commerce and management consulting, with his most recent role being at Amazon. Over the last 6.5 years at Amazon, he conceptualized, launched, and scaled several businesses like Amazon Fresh, Amazon Food, and Amazon Pharmacy. Prior to Amazon, he served as a Partner at McKinsey.

Brokerage's View & Comments on Target Price, Suggests Buy

According to the brokerage, "There is no material change to our EPS forecasts. Outlook on growth and margin for the QSR sector remains attractive, unlike the rest of the consumption space, where uncertainty prevails on both fronts. JUBI remains our top pick in this space, given: a) it has the best Balance Sheet to fund expansion; b) its proven track record of managing both store expansion and healthy SSSG; and c) its technological edge over peers."

"We maintain our Buy rating with a Target Price of Rs 680 per share (40x FY24E pre-Ind AS 116 EV/EBITDA). Premium multiples are assigned for the best-of-breed operating and financial metrics in a high growth category," brokerage has said

About The Company - Jubilant FoodWorks Limited

Jubilant FoodWorks is part of the Jubilant Bhartia Group and is India's largest foodservice Company. The Company holds the master franchise rights for three international brands, Domino's Pizza, Dunkin' Donuts and Popeyes® addressing three different food market segments. The Company launched its first homegrown brand - Hong's Kitchen in the Chinese cuisine segment & has also begun offering a brand-owned ready-to-cook range of sauces, gravies and pastes, 'ChefBoss'.

The Company also entered into the exciting world of Biryanis with the launch of "Ekdum!". It offers the widest range of Biryanis curated from various parts of India using authentic ingredients along with an extensive range of Kebabs, Curries, Breads, Desserts and Beverages.

The Company currently operates more than 1,567 outlets for Domino's Pizza, Dunkin' Donuts and Hong's Kitchen and is a market leader in the pizza segment.

Disclaimer

The stock has been picked from the brokerage report of Motilal Oswal. 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. Goodreturns.in advises users to check with certified experts before taking any investment decisions.