Brokerage firm Prabhudas Lilladher maintained its "buy" rating on Jubilant FoodWorks in its most recent research note, with a DCF-based target price of ₹610 apiece, implying a potential upside of 20 percent from the stock's previous closing price.
Shares of Jubilant FoodWorks, which operates brands like Domino's Pizza, Dunkin' Donuts, and Hong's Kitchen, underperformed the market in the last one year by falling 31.33 percent, while Nifty50 has gained 0.60 percent during the same time frame.
Following the company's release of Q2 results in November last year, the stock saw a sharp decline, falling by around 16.66 percent since then.
The stock has significantly underperformed the QSR pack over the last 3, 6, and 12 months, with a drop of 15 percent, 8 percent, and 31.33 percent, respectively.
However, Prabhudas Lilladher believes the downside for the stock is capped and the risk-reward seems favorable at 37x FY25 EPS.
The brokerage stated that the recent launch of the US chicken brand Popeyes by Jubilant FoodWorks in Chennai could be a trigger for the stock. The company is entering the Chennai market with Popeyes after opening 12 stores in Bengaluru in the past three quarters.
Jubilant FoodWorks entered into an agreement with Restaurant Brands International Inc. in the fourth quarter of 2021 to develop the Popeyes franchise in India, Bangladesh, Nepal, and Bhutan.
Popeyes, which opened its first store in Bengaluru, found acceptance among the likes of KFC and McDonald’s. Since then, Popeyes has gained wider consumer acceptance on the back of its differentiated flavour profile, providing strong repeat rates (30%+), and establishing store economics, according to the brokerage.
With the guidance of 20–30 Popeyes stores in FY23, fast scale-up can fill in the void of a second large brand in the portfolio of Jubilant, as the earlier global brand launch of Dunkin' Donuts failed due to limited acceptance of donuts, it added.
"Our channel checks indicated positive product feedback across multiple visits." Products were found to be fresh with a differentiated flavour profile distinct from other competing fried chicken brands," said Prabhudas Lilladher.
Earlier, brokerage firm Motilal Oswal Financial Services also maintained its “buy” call on the stock with a target price of Rs. 740 apiece, citing Jubilant's Q2FY23 results were mostly in line and 8.4 percent "like-for-like" (LFL) growth as healthy, given the unfavourable base.
"Jubilant Food remains our top pick in this space, given that, the company has the best balance sheet to fund expansion; it has a proven track record of managing store expansion and a healthy SSSG; and it has a technological edge over peers. The experience of the new CEO from Amazon India will further augment Jubilant's clear leadership on the technology front," said Motilal Oswal.
"The demand environment continues to be positive. Both the start of regionalizing the product mix and the strong response to the loyalty programme are encouraging. While material cost pressures persist, there appear to be no material concerns regarding lease rentals and employee costs," the brokerage added.
Meanwhile, on January 19, the company said it has lined up a ₹900 crore capex plan for the next 12 to 18 months.
On the outlook for the near-medium term, the company said it has a plan of 250 stores for Domino's India in the next 12–18 months and 40–50 stores for Popeyes India in the next 12–18 months.
31 analysts polled by MintGenie on average have a 'buy' call on the stock.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.
