Comments
Motilal Oswal
Jubilant FoodWorks (Neutral)
Target: ₹2,110
CMP: ₹2,292.75
Jubilant FoodWorks Q1-FY21 results were weaker than expected, especially in terms of operating margins. Depreciation and interest costs were also higher than anticipated. Nevertheless, recovery in system sales was sharp in July 20 and August 20 to 69.8 per cent and 84.6 per cent, respectively, of last year's levels for the corresponding months.
The company has reported sales decline of 59.5 per cent y-o-y to ₹380 crore (estimated: ₹420 crore), with same-store sales growth of negative 61.4 per cent y-o-y (estimated: negative 63 per cent₹).
The management expects near-normalcy by the exit of FY21.
Three events underpin higher growth and profitability for Jubilant FoodWorks beyond the Covid19-impacted FY21: the ongoing structural push toward delivery; the introduction of delivery charge; and opportunity created by the crisis to close down 105 of its least profitable (and dine-in dependent) stores.
This would lead to all-time high EBITDA margins in FY22, resulting in 33 per cent upward revision in our EPS projections for FY22. Valuations of 65x FY22, however, fully capture the upside from a one-year perspective.
We maintain neutral.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.