Jubilant Foodworks shares can rally up to 53%, analysts say after Q3 results

Shares of Jubilant Foodworks Ltd. are in focus on Wednesday, February 11, as brokerages are largely positive on the stock and see up to a 53% upside on the stock as it reported its third quarter earnings.

The company reported a strong EBITDA performance and its operating leverage played out in the third quarter.

On a standalone basis, Jubilant Foodworks' profit after tax increased 31.7% to ₹54.07 crore in the December quarter from ₹41.04 crore in the previous year.

Its revenue was up 11.8% at ₹1,901.5 crore from ₹1,611 crore in the third quarter of the previous year.

Its gross margin narrowed marginally to 74.9% from 75.1% in the last year.

The company's earnings before interest taxes depreciation and amortisation (EBITDA) increased 18.1% to ₹369.3 crore from ₹312.7 crore in the previous year.

Its margin expanded to 20.5% from 19.4% in the year-ago period.

Dominos India witnessed over 5% like-for-like growth in the quarter under review, which was positive for the eighth consecutive quarter.

Its delivery channel revenue increased 16% from last year. Delivery now makes up for 74.9% of its revenue. It added 75 stores in the third quarter and is now available in a total of 511 cities.

The company's Popeyes brand recorded high double-digit like-for-like growth. Its store count is at 73, including five new additions in the December quarter.

Meanwhile, four brokerages — Jefferies, CLSA, Citi and HSBC — shared their view on the Jubilant Foodworks stock after its third quarter earnings. While CLSA has a 'hold' rating, the remaining three have 'buy' recommendations on the stock.

CLSA

CLSA has a 'hold' recommendation on the stock with a target price of ₹505 per share.

It said Jubilant Foodworks' sales were in-line, and it was known following its business updated. Its EBITDA margin, which increased 109 basis points from the previous year, was above estimates by 79 basis points, CLSA added.

The company's gross margin improved by 52 basis points sequentially as the company took calibrated price increases and as product launches were accretive to its margin, the analyst said.

The company's sales per store were flat with Domino's India's like-for-like growth of 5% and Popeyes' in high double-digits, CLSA added.

Citi

The brokerage has a 'buy' rating on Jubilant Foodworks with a target price of ₹800 per share.

It said the company reported strong growth and margin improvement, as it cited its like-for-like growth and EBITDA margin expansion.

Citi said other key points included:

• Confident of 5-7% like-for-like growth sustaining (despite high base)


• On track to reach 15% pre-IND as EBITDA margin by FY28


• Popeyes reported double-digit like-for-like growth (third consecutive quarter)


• Turkey business is generating free cash flow and servicing debt (pertaining to acquisition)

Jefferies

Jefferies has a 'buy' rating on Jubilant Foodworks with a target price of ₹850 per share.

It said the underlying pre-Ind AS EBITDA margins expanded to a nine-quarter high, backed by operating leverage and with limited contribution from product price hikes too.

This margin expansion is particularly positive as it came despite a moderation in like-for-like growth, addressing a key investor concern about the profitability trend, the analyst said.

It said delivery continued to gain salience, but dine-in requires attention.

The company's management guided for 5-7% like-for-like growth, with 15% topline growth and continued margin expansion, Jefferies added.

HSBC

The brokerage has a 'buy' rating on Jubilant Foodworks with a target price of ₹700 per share.

It said the 5% EBITDA beat was driven by gross margins (price hikes, new launches), operating leverage, 200 basis-point margin improvement on course.

The company has guided for 5-7% like-for-like, despite high base. Also, confidence in growth in Popeyes, of the strongest ever seen, HSBC said.

Shares of Jubilant Foodworks ended the previous session 1.3% up at ₹555.7 apiece. The stock has risen 6% in the past month but has declined 11.9% in the past six months.

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