Jubilant FoodWorks' Muted Sales Growth Disappoints Street, But Analysts Positive
Jubilant FoodWorks shares, already under pressure over controversies around high levels of toxic chemicals in products, have been beaten down further post fourth quarter earnings announcement over the weekend.
In Q4, Jubilant FoodWorks' net profit declined 7 per cent to Rs 29 crore, hit by higher expenses. During the quarter, overall expenses increased by 15.41 per cent to Rs 575.78 crore as compared to Rs 498.87 crore in the corresponding year-ago period.
Jubilant FoodWorks' revenue increased 14 per cent to Rs 618 crore compared to Rs 542 crore in the year-ago quarter.
Jubilant FoodWorks, which operates Domino's Pizza and Dunkin' Donuts' outlets in India, said its same store sales growth (a key performance metrics) stood at 2.9 per cent in Q4. For FY16,
Jubilant FoodWork's SSG growth was 3.2 per cent, better than 0.1 per cent growth in FY15, but still weak as compared to the Street expectations.
Nirmal Bang Securities cut Jubilant FoodWorks' SSG growth estimate by 100 and 400 basis points to 7 per cent and 9 per cent for FY17 and FY18, saying the recovery is taking longer than expected.
The management attributed the muted same store sales growth numbers to sluggish demand. Ajay Kaul, CEO of Jubilant FoodWorks, told NDTV Profit that "there has not been significant shift in consumer sentiment. It is reflective in same store growth numbers. It is continuing in the same zone - 3 to 3.5 per cent."
The company will continue to invest in technology to benefit from growing sales through online channels, Mr Kaul said. Currently, 40 per cent of its orders are generated from online channels, he added.
Despite weak numbers, brokerages continue to like the stock. Nirmal Bang maintained "buy" on the stock, with a target price of Rs 1,287.
"The strength of the company lies in its healthy balance sheet, constant innovation, strong delivery model and potential to deliver high operating leverage. Expansion of delivery business through on-the-go stores, tie-up with food delivery aggregator (Swiggy's) and IRCTC has the potential to widen growth prospects," it said.
Religare also has a "hold" rating on the stock (target Rs 1200), but it warned that rapid fragmentation and high fixed costs are a risk to growth.
Meanwhile, investors who bet on Jubilant FoodWorks to cash in on the Indian consumption story have been disappointed. The stock has significantly underperformed the broader market in the past one year, falling 43 per cent. In comparison, the benchmark Nifty50 index declined 3 per cent during the period.
Jubilant FoodWorks shares today ended 0.86 per cent higher at Rs 1,032 as compared to a 0.22 per cent decline in Sensex.
