Jubilant Foodworks Ltd. share price target

We foresee enough levers of growth in Domino's like (a) Splitting urban stores (margin accretive), (b) Menu expansion (pizza variants and in-house beverages), (c) Shorter delivery time (20min live in few stores), (d) Reimaging stores to combat slowdown in dine-in and (e) Loyalty program (winning strategy in Domino's US). Additionally, JFL is aspiring to grow non-linearly driven by its investments in technology, core team and creating more brands under JFL umbrella. JFL reported a quarter marked with several positives (healthy SSG, 15 qtr high store expansion, robust app downloads and GM expansion). 2QFY20 SSG beat the street and our expectations despite slowdown in consumption, flooding and heavy base (21% SSG base). We believe earnings upcycle will begin from 3QFY20 onwards which will re-rate the stock. We upgrade our EPS estimates by 1-3% and revise our TP to Rs 2,134 (earlier 2,092). JFL remains our top pick in the consumer space. Reiterate BUY.

We expect revenue to grow by 13.4%/13.5% YoY in FY20E/FY21E. We estimate LTL EBITDA margin to compress by 67bps/87bps YoY to 16.5%/15.7% for FY20/21E mainly due to higher employee cost inflation and lower operating leverage. LTL EBITDA growth rate is likely to remain in high single digit mainly led by moderation in growth rates going ahead. Incorporating the improved profitability and turnaround time for stores along with the improvement in ROE due to tax cuts, we revise our PE multiple valuation to 40x (vs. 37x earlier). Our revised target price of Rs1,340...

22 October 2019 to INR9.9b (in-line), with growth of stores that were not split since 1 Apr18) stood at 6.5% YoY. EBITDA by one-off provision of INR125m. underlying EBITDA was up 9.7% to INR1.6b with the margin at 16.4%. and EBITDA margin by 700bp YoY to 23.8%. Underlying EBITDA margin contracted 30bp YoY to 16.4%. (1) Continued pressure in dine-in sales was offset by delivery buoyancy. (2) The impact from cloud kitchen has not been material in the 26 cities where this model is present. (3) It opened 40 new stores the highest in 15 quarters.

However, we now believe that JUBI will be among the key beneficiaries of the cut in corporate tax to 25.2%, as it adds around 13% to its PAT. On the third factor, the corporate tax cuts provide an opportunity to JUBI to offer discounts and promotions and thus eat into the share of unorganized players. It can spend a significant part of the INR450-500m incremental PAT on promotions/price offs in an attempt to gain market share. Four points are competitors would have such windfall gains, and if they choose to match JUBIs efforts on promotions and price offs, they would end up bleeding further. corporate tax cuts offer multi-year benefits to JUBI, providing it with incremental benefit every year until competitors scale up well. Aggression in terms of price cuts/promotional spends if judicial will also drive faster conversion of customers from other restaurant businesses to Dominos.

We reiterate our HOLD rating on the stock with a revised target price of Rs 1,240 based on 40x FY21E adj. EPS. Revenue growth supported by SSG against strong Q1 last year JFL registered strong growth in revenue of 9.9% YoY to Rs. 940cr (+8.7% QoQ), with improved customer demand amidst Cricket World Cup Season during the quarter. Company achieved SSG of 4.1% in Domino's Pizza, although the growth has slowed down from the double digit growth of 25.9% recorded in Q1FY19 mainly due to the company's splitting store strategy in order to tap the market and improve customer...

We foresee enough levers of growth in Domino's like (a) Splitting urban stores (margin accretive), (b) Menu expansion (pizza variants and in-house beverages), (c) Shorter delivery time (20 min pilot underway), (d) Reimaging stores to combat slowdown in dine-in and (e) Loyalty program (winning strategy in Domino's US). We believe these benefits will begin to reflect from 2HFY20 at a time when base for SSG starts moderating. Recent stock correction provides a good entry point. JFL performance was weak owing to moderation in discretionary spend, a heavy base (26% SSG) and aggressive A&P; spends (>12% YoY). We cut our estimates by 3% to factor 1Q miss and moderation in 2Q SSG but maintain our estimates for 2HFY20 (supported by price hikes and recovery in macros). Near-term headwinds provide a great opportunity to buy. We value at 46x on Jun-21 EPS, arriving at a TP of Rs 1,778. Maintain BUY.

View: SSSG continues to moderate; Maintain Accumulate JFL's Q1FY20 results were below our estimate, with a 4.1% YoY same store sales growth (SSSG) vs our estimate of 5%. A high base of 25.9% YoY in SSSG restricted overall growth in Q1FY20. We believe JFL will likely post a high single digit SSSG in the ensuing quarters, as the base remains highly unfavorable. In addition, margins are likely to remain under pressure in the near term due to store additions, escalating RM prices, and rise in A&P; costs. We revise our FY20E and FY21E EPS estimates downwards to ` 25.5...

24 July 2019 were not split since 1 Apr18) stood at 5.8%. EBITDA grew 54.2% YoY to underlying EBITDA was up 3.6% YoY to INR1.5b, with the margin at 15.7%. Underlying PAT rose 9.2% YoY to INR815m. Underlying EBITDA margin shrank 100bp YoY to 15.7%. (1) JUBI took a low-single-digit price hike toward end- 1QFY20 to offset the impact of commodity (largely dairy) inflation. (2) Slowdown in dine-in continued in 1Q due to muted demand and a change ordering behavior (increasing shift to delivery).

We value at 46x on Mar-21 EPS, arriving at a TP of Rs 1,739. JFLs 4Q performance was mixed with modest SSG growth and healthy internals. We remain bullish on JFL, this quarter does not impair our long-term thesis. Instead, our confidence rises based on managements commentary on (a) Initiatives undertaken in technology, (b) Reimaging stores (design, self-ordering kiosks etc.) and (c) Beefing up Dominos menu with beverages (in-house brands).

Incremental earnings growth under pressure from a multitude of factors Sales increased 10.9% YoY to INR8.65b (our estimate: INR8.61b) in 4QFY19, with same-store sales (SSS) growth coming in at 6% YoY (our estimate: 8%) off a high base (+26.5% in the year-ago period). Total Domino's store count stood at 1,227, with net addition of 27 stores (opened 30, closed 3) in the quarter. EBITDA grew 15.5% YoY to INR1.5b (our estimate: INR1.5b). Adj. PAT was up 16.3% to INR792m (our estimate: INR791m). Gross margin expanded 180bp YoY to 76.1%. Higher other expenses (+70bp...