1 week ago
Domino’s India’s franchise operator Jubilant Foodworks reported its July to September quarter results that were largely in line with CNBC-TV18 poll estimates. However, on a year-on-year basis, the company’s net profit, margin and sales per store have taken a hit. At the same time, Jubilant Foodworks’ like-for-like (LFL) sales growth for the quarter in a challenging market has left the brokerages divided.
Brokerage firm CLSA has explained that Domino’s India is seeing a shift to delivery from dine-in, which is dilutive to margin. The sales per store declined 1.1% year-on-year and LFL growth was slightly below the brokerage’s estimate. The brokerage, however, noted that the company’s management has indicated an acceleration in same-store sales growth (SSSG) in the third quarter.
CLSA has an 'underperform' call on Jubilant Foodworks’ shares with a target price of ₹445, which means it sees a potential downside of more than 26% in the stock from the closing price on November 11. It has also cut FY25-27 earnings estimates by 17-32%.
| Brokerage | Rating | Target (in ₹) |
| CLSA | Underperform | 445 |
| Jefferies | Buy | 880 |
| Citi | Buy | 700 |
| Nuvama | Hold | 631 |
| Goldman Sachs | Neutral | 620 |
| Morgan Stanley | Equal-weight | 620 |
Jefferies, on the other hand, has a buy call on the stock with a target price of ₹880, indicating a potential upside of 46%. The brokerage said the Domino’s India operator managed to continue with a positive SSSG in a tough macro environment and that delivery continued to show respectable growth while dine-in suffered. It also asserted that management is unapologetically focusing on growth.
#2QWithCNBCTV18 | Jubilant Foodworks Reports #Q2Results????
????Net Profit At ₹52 Cr Vs CNBC-TV18 Poll Of ₹55.5 Cr
????Revenue At ₹1,466.8 Cr Vs CNBC-TV18 Poll Of ₹ 1,425 Cr
????EBITDA At ₹284.2 Cr Vs CNBC-TV18 Poll Of ₹280 Cr
????Margin At 19.4% Vs CNBC-TV18 Poll 19.6% pic.twitter.com/c7OfYf9XhZ
— CNBC-TV18 (@CNBCTV18Live) November 11, 2024
Citi too has given Jubilant Foodworks a buy rating with a target price of ₹700. It believes that the company’s operational performance continued to improve and it expects recent initiatives to improve LFL further. However, the brokerage has cut FY25-27 revenue estimates by 3% and EBITDA by 5-7%.
Nuvama has reiterated its ‘hold’ call and increased the target price to ₹631. It noted that Jubilant's positive LFL growth in Q2FY25 has set it apart in a challenging market. The company's focus on delivery and innovative strategies has fuelled this success.
Also Read | Now your Domino’s Pizza will be delivered in just 20 minutes: Jubilant Foodworks
“Jubilant's strategic moves to stimulate consumption, from revamped menus to free deliveries, are paying off, revitalising both delivery and dine-in businesses. While the current trajectory necessitates slight adjustments to our FY25E/26E revenue (-1.1/-0.3%) and PAT (-5.7%/-0.6%) projections, we remain bullish on the company's turnaround potential,” the brokerage said.
The company's 20-minute delivery guarantee and the elimination of additional charges have encouraged customers to opt for delivery over takeaway, leading to a substantial shift in consumer behaviour, it added.
Reflecting on margins, Nuvama said gross margin contracted 30bp to 76.1%. The company's proactive cost-cutting measures successfully absorbed two–thirds of this margin erosion, mitigating the negative impact of forgone delivery fees and the growing contribution from the delivery channel.
“EBITDA margin (pre-Ind-AS) declined 160 bp to 11.7%. Domino's mature stores achieved an average daily sales (ADS) of ₹80,185, a six-quarter high.”
Goldman Sachs has a neutral call on Jubilant Foodworks with a target price of ₹620. The brokerage explained that even though Dominos’ LFL growth has marginally moderated, it still outperforms peers. Multiple initiatives are underway to drive growth recovery, it said, adding that EBITDA margin recovery is also likely to be very gradual.
Meanwhile, Morgan Stanley is of the view that demand trends remain uninspiring though initiatives are showcasing improving growth trends. The brokerage has an equal-weight stance on the company with a target price of ₹620.
Despite the mixed view of brokerages, Jubilant Foodworks’ shares surged over 7% to ₹646 on NSE at 10:07 am.
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