JFL’s revenues grew by 6.7% YoY to Rs 6.1bn, while SSG was negative 3.2% YoY. EBITDA & APAT contracted by 14.2% & 31.1% YoY, respectively.Industry growth remained challenging as SSG for Pizza Hut, KFC and Specialty Restaurants were down by 7%, 1% & 8%, respectively. JFL management is confidant on achieving positive SSG in Q2FY17 & also plans to gear up for the upcoming festive season. However, considering the weak industry growth & JFL’s lack of price hike, we expect FY17 growth would remain challenging. We expect 13.3% & 16.6% sales growth in FY17 & FY18, respectively.

JFL is strong player and has consistently gained market share. However, considering (1) weak industry growth (2) limited tailwinds for sales & margin & (3) lower store expansion, we cut EPS estimates by 28% & 27% for FY17 & FY18. Based on 48x P/E (20+% discount to historical P/E) on FY18 EPS, we reduce TP to Rs 1,172 (earlier TP Rs 1,342). We downgrade stock to NEUTRAL.