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Shares of <a target="_blank" href="https://mintgenie.livemint.com/stocks/jubilant-foodworks-S0003054">Jubilant FoodWorks tanked almost 15 percent</a> in intraday trade on March 14 to hit their fresh 52-week low of ₹2,444 on BSE as investors were spooked by the resignation of the company's CEO and Wholetime Director.

Pratik Rashmikant Pota has resigned as the CEO and Wholetime Director of the company to pursue opportunities outside Jubilant FoodWorks.

"The board of directors of the company on March 11, 2022, accepted the resignation of Pratik Rashmikant Pota as the CEO and Wholetime Director of the company as he wishes to pursue opportunities outside Jubilant FoodWorks. Pota will continue in his current role till June 15, 2022," the company said in a BSE filing on March 11.

The CEO's exit from the company has made many brokerages review their view on the stock, with some of them advising to trim positions in the stock while some still showing faith in the company's long-term story. The stock is now 47 percent down from its 52-week high of ₹4,577.45 on BSE that it had hit on October 13, 2021.

<h2>The ones that highlight uncertainty</h2>Global brokerage firm Macquarie has downgraded the stock of Jubilant Food to an 'underperform' while cutting FY22, FY23 and FY24 earnings per share (EPS) estimates by 3 percent, 13 percent and 15 percent, respectively. Macquarie has a target price of ₹2150 on the stock.

As per a CNBC-TV18 report, Macquarie has highlighted that the resignation of the CEO raises concerns around execution and earnings growth. The brokerage believes the company's weaker-than-industry sales will come under further pressure now.

JPMorgan has also downgraded the stock to a 'neutral' and lowered FY23 and FY24 EPS estimates by 11 percent and 8 percent, respectively, largely due to margin cuts. JPMorgan, however, continues to believe in the company's mid-to-long-term story. JPMorgan has a target price of ₹3000 on the stock.

Morgan Stanley has also downgraded the stock to an 'underweight' and added that the sudden leadership change has threatened the near-term outlook of the stock. It has cut the FY23 and FY24 EPS estimates by 15 percent and 24 percent, respectively.

Morgan Stanley also believes Jubilant FoodWorks is still well-positioned to play a long-term growth story in organised food. It has a target price of ₹2250 on Jubilant FoodWorks.

Domestic brokerage firm HDFC Securities has a 'reduce' call on the stock with a target price of ₹ ₹2,400, adding that the CEO's exit, along with past exits of many members of senior management, is certainly adding several risks.

"Apart from the fact that his execution expertise would be missed (quite essential from long-term growth perspective), the timing of his exit is also quite odd; it comes at a time when Jubilant has been guiding for massive store expansion across brands and geographies over the next three-five years," HDFC Securities said.

"Although we remain positive on Jubilant’s superior business model, rich valuation remains a concern for us. We cut our EPS estimate by 6 percent and 4 percent for FY23 and FY24, owing to steep inflation and macro headwinds. We also cut our target price-to-earnings ratio (P/E) multiple to 45 times (earlier 60 times) on FY24 EPS, due to uncertainty around various aspects post the exit," HDFC Securities said.

<h2>The ones that keep faith in the stock's long term story</h2>Kotak Securities has an 'add' call on the stock but cut the target price to ₹2,850 from ₹3,365 while it underscored that the CEO's exit could slow down the company's growth engine.

The brokerage firm has cut FY23 and FY24 revenues by 3 percent, EBITDA margin by 50-60 bps and earnings by 8-9 percent.

"Jubilant has re-rated to 50-55 times PE from 20-25 times PE over FY2017-22. Execution slippage during CEO transition could result in some de-rating. We revise fair value to ₹2,850 valuing Domino’s at ₹2,400 implying 43 times FY24 pre-Ind AS 116 PE and option value of ₹450 from new brands," said Kotak.

Brokerage firm Motilal Oswal Financial Services has a 'buy' call on the stock with a target price of ₹3,680. It said while the CEO's resignation has come as a near-term surprise, structural opportunity remains intact for the stock.

"The resignation of the CEO comes as a negative surprise and we believe the exit of Pota could have an adverse short-term impact on the stock, considering the phenomenal efforts during his tenure. While he has developed a good second rung, we will have to watch out for his successor and the strategic outlook ahead," Motilal Oswal said.

Despite the near-term headwinds, the structural opportunity for Jubilant remains intact unless there is a material shift in the future strategy outlined by the new CEO, Motilal said.

"The post-Covid environment offers an enhanced opportunity for quick-service restaurants (QSRs) in India, and Jubilant is well placed to capture the opportunity driven by its three strong moats of delivery, value, and technology. It remains among our top picks in the discretionary space along with Titan and Devyani International," Motilal Oswal said.

Market sentiment on the stock is ‘neutral’, according to a <a target="_blank" href="https://mintgenie.livemint.com/stocks/jubilant-foodworks-S0003054">MintGenie poll</a> and an average of 30 analysts has a ‘buy’ call on the stock.

(The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.)

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