Jubilant FoodWorks - On The Verge Of A Turnaround: HDFC Securities

HDFC Securities Institutional Equities

The Pizza category has a tumultuous history. It has faced significant challenges over the past few quarters (compared to other mainstream quick service restaurant categories such as burgers and chicken) due to three reasons:

1. its price-sensitive nature— deals and discounts have driven a decent amount of growth for mainstream players in the past in this category;

2. hyper-competition from regional and local players, as the mainstream pizza brands earn gross margins of 75%+, which enables these players to play the pricing game, or at least provide better quality than national players at a similar price;

3. increased downgrading to other QSR offerings/value pizza in the context of hyperinflation since this category has a higher average order value of Rs 450-500; and

4. lack of tangible breakthrough innovation (e.g. cheese burst pizza) which can uplift the same-store sales growth.

We believe the latter issues (specifically points 3 and 4) shall fade away in the medium term, as Jubilant FoodWorks Ltd. has made substantial efforts to tackle these challenges.

We upgrade Jubilant FoodWorks to Add from Reduce with a target price of Rs 685 (SOTP-based), as we assign a value of Rs 40/share for the DP Eurasia business.

Notably, we have also increased our target enterprise value/Ebitda multiple for India business from 30 times to 35 times, as we foresee better visibility of uptick in SSSG.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.