Jubilant FoodWorks fell 5 percent in intraday deals on Thursday on the back of weak earnings for the quarter ended March 2023. The quick service restaurant chain operator posted over 59 percent year-on-year (YoY) decline in its net profit at ₹47.5 crore in Q4FY23 as against ₹116 crore in the same quarter last year.
Its revenue from operations rose 8 percent in the quarter under review to ₹1,252 crore versus ₹1,158 crore in the corresponding quarter last year. Meanwhile, its EBITDA declined 12.9 percent to ₹252.2 crore and its EBITDA margin stood at 20.1 percent, down from 25 percent in the year-ago period on the back of high input prices.
Stock price trend
The stock fell as much as 5.1 percent to its intra-day low of ₹455.90. Meanwhile, it has shed over 2 percent in the last 1 year and is down 6 percent in 2023 YTD. The stock has given negative returns continuously for the first 3 months of the current calendar year, however, it recovered a bit in April and May. The stock has advanced 6.3 percent in May so far after a 1.4 percent gain in April. However, it lost 0.2 percent in March, 9.5 percent in February and 4.7 percent in January.
Before April, the stock had given negative returns for 6 straight months between October 2022 and March 2023, falling 29 percent in this period.
It has hit its 52-week high of ₹652.20 on October 6, 2022 and 52-week low of ₹412.20 on March 20, 2023.
The stock is currently 26 percent away from its 52-week high and 16.6 percent away from its 52-week low.
Brokerage Views
Most brokerages remained bullish on the long-term outlook of the stock but some cut earnings estimates due to short-term headwinds like higher raw material prices.
Centrum: The brokerage has retained its ‘buy’ call on the stock with a target price of ₹570, indicating an upside of 25 percent.
"JUBI in its rejuvenated approach to drive growth through portfolio expansion into high growth chicken QSR segment (Popeyes), coupled with the enhanced consumer experience in the value segment and by reimaging store could achieve mid-single digit LFL growth in our view. However weak demand, incremental competition in pizza QSR, and rising inflation in dairy pose short-term challenges, yet we expect JUBI to defend its current margin," said the brokerage. It also marginally cut its earnings estimates for FY24E by 1.1 percent and increased it for FY25E by 4.3 percent.
Motilal Oswal: The brokerage also reiterated its ‘buy’ call on the stock with a target price of ₹560, indicating an upside of 24 percent. As per the brokerage, there are strong long-term opportunities in QSR and the company with its moats is poised to take advantage of the same. It further noted that after a steep stock price correction of 25 percent from its peak, valuations appear reasonable at 28x FY25E EV/EBITDA for a business that has ROE superior to QSR peers and other retail companies.
"The new CEO’s efforts on improving dine-in LFL growth, his decision not to hike prices amid the transient high-cost environment in wheat and cheese, and building the technological and analytical edge of the company are welcome moves that will create value in the medium term," it highlighted.
The brokerage maintained its revenue/PAT estimates for FY24/FY25, however, it cautioned that the RM cost pressure may continue for a few quarters.
Sharekhan: The brokerage has retained its ‘buy’ call on the stock with a target price of ₹600, indicating an upside of around 30 percent.
"A brand-wise differentiated strategy, aggressive store additions, improving customer experience on the delivery platform, sustained innovation, and customer-centric offerings will drive growth in the medium-long term," the brokerage said, adding that it likes the company's strategy of investing in core and new ventures to scale up business growth and revenue without comprising profitability in the long run.
However, it warned that discretionary demand is expected to remain uncertain in the near term.
Prabhudas Lilladher: The brokerage downgrades the stock to ‘accumulate’ from ‘buy’ post its earnings but raised its target price to ₹515 from ₹500 earlier, indicating an upside of 15 percent. It remains bullish on the stock given the company's strength in the Pizza market and the strong possibility of Popeyes emerging as the second major brand in coming years.
However, PL cut its FY24/FY25 EPS estimates by 9.5 percent/8.9 percent and downgraded the stock due to 1) tepid demand with current recovery only being seasonal 2) delayed margin recovery in an inflationary environment & heightened competition 3) an increase in initial losses in Popeyes and 4) sustained high capex guidance of ₹7 billion including Mumbai commissary.
