Jubilant Foodworks: Sharekhan Maintains 'Buy' with Rs. 800 Target Price, Sees Double-Digit Growth Potential
Sharekhan has maintained its 'Buy' rating on Jubilant Foodworks Ltd (JFL) with a revised target price of Rs. 800, citing the company's multiple growth initiatives and its position as a strong player in the quick-service restaurant (QSR) sector. The brokerage believes that a combination of strong growth strategies, including new store openings and expansion into new markets, coupled with a recovery in same-store sales growth (SSSG), positions JFL for double-digit growth in the coming years.
Key Highlights from the Report:
- Acquisition of DP Eurasia: JFL's acquisition of DP Eurasia, a leading emerging markets' foodservice company, puts it on track to become a major force in the sector with a portfolio of five brands and over 3,000 stores across six markets.
- Improving LFL Growth: Domino's India, the core business, witnessed an improvement in like-for-like (LFL) growth to 3% in Q1FY25, driven by strong growth in delivery services.
- Operational Efficiencies: JFL is focusing on operational efficiency improvements through initiatives like Project Vijay, which aims to streamline processes and optimize costs.
- Strong Cash Flows & Return Ratios: JFL generated significant cash flow from operations in FY2024, and the brokerage expects return on equity (ROE) and return on capital employed (ROCE) to improve in the coming years.
- Diverse Brand Portfolio: The acquisition of DP Eurasia expands JFL's brand portfolio, which includes Domino's, Popeyes, Dunkin', Hong's Kitchen, and Coffy.
Rationale for the 'Buy' Recommendation
Analysts at Sharekhan believe that Jubilant Foodworks is well-positioned to benefit from the long-term growth potential of the QSR sector. The company's diverse brand portfolio, expanding geographic reach, and focus on operational efficiency are expected to drive revenue and profit growth. JFL's focus on innovation, with a strong emphasis on delivering value to customers and introducing new offerings, is also a key driver. The acquisition of DP Eurasia provides a significant opportunity to expand into other emerging markets and diversify revenue streams.
Potential Risks
The analysts acknowledge that there are potential risks to the outlook. A slow recovery in Domino's India's LFL growth and increasing commodity prices, coupled with potential currency devaluation, could impact earnings in the short term.
Forward-Looking Outlook
Sharekhan expects JFL to deliver a revenue and PAT CAGR of 21% and 48%, respectively, over FY2024-2027. The company's focus on LFL growth, new initiatives, and expansion into emerging markets is expected to drive this growth.
Valuation Methodology
The report uses the EV/EBITDA (Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization) multiple for valuation. Sharekhan estimates that JFL's stock is currently valued at 29x/24x/21x its FY25E/FY26E/FY27E consolidated EV/EBITDA, respectively.
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