Jubilant Foodworks Ltd. share price target

SSSG continues to be flat impacted by decline in average ticket size (consumer down trading due to inflation) while order volume remains healthy. Revenue performance in both delivery and dine-in segment has been moderate. Consequently, overall revenue growth (at 8% YoY, 8% 4Y CAGR) underperformed retail expansion (16% YoY, 10% 4Y CAGR).

We returned impressed from Popeyes first store in Chennai (Phoenix Mall, Velachery), which marks its entry into Chennai and expansion from Bangalore (12 stores), in the fried chicken market. The store atmosphere is appealing with vibrant colours and a contemporary look and feel, self-ordering kiosk, good lighting and highest seating capacity amongst Popeyes India outlets (with a separate section for ‘open to sky’ table seating).

Forecasting is an important element in an analyst's job. We forecast that our report on Jubi 12-24 months from now may have this content - "Sameer joined Jubi in Sep'22. In our opinion, he quickly identified the issues (weak dine-in, necessity to improve value in <Rs100 price point etc.).

JFL delivered a muted performance lead by multiple factors: 1) underperformance in Dine-in and Takeaway (9.8% combined growth), 2) Flat LFL growth (0.3% in Q3 FY23 as compared to 8.4% in the previous quarter), 3) Steep inflation in major Raw material – Cheese lead to sharp contraction in Gross margins (230bps), and 4) High competition at lower price points. The company has added 60 new stores in 16 new cities maintaining guidance for annual store addition of ~250 stores.

Expectations from Jubi were low. 3Q results were disappointing for consensus. It faces multiple problems, (1) rejuvenated Pizza Hut, (2) higher competition in <Rs100 price point, (3) underwhelming recovery in dine-in (likely a result of under-investment over the years) etc.