Stock market outlook
On NSE, the current market price (CMP) of Jubilant Foodworks is Rs 581.25 each after a gain of 3.06%. Its 52-week low is Rs 451.20 each recorded on May 12, 2022, and the 52-week high is Rs 918 each recorded on October 18, 2021. The market capitalization of the stock is 38,353.50 crore.
Returns on investments
Over the past week, stocks have returned negative 0.51%. While in the last month it jumped around 0.03%. Over the past 3 months, stocks have returned a positive 19.75%. Over the past year, it has yielded a negative return of approximately 23.35%. Over the past 3 and 5 years, the stocks have given multibagger returns of 151.73% and 321.1%, respectively.
Attractive growth prospects, widening gaps
JUBI continues to rely heavily on its three key moats of delivery expertise, supply chain efficiency and technological superiority. Emphasis on its “value for money” proposition was also highlighted, with the company opting not to increase the price of its “Every Day Value (EDV)” offering even though it took price increases. prices on other parts of the portfolio. Management also indicated a good initial response to Popeyes with medium-term targets of 250 to 300 stores. We highlighted in a detailed note earlier this month: a) how Popeyes fared globally, b) what JUBI brings to the table, and c) why do we think he’s the more scalable among JUBI’s non-Domino companies. Quick service restaurants (QSRs) are our favorite picks to play the consumer discretionary growth story. JUBI, DEVYANI and SAPPHIRE are our top picks in this area.
Changes impacting the restaurant industry after Covid-19
Structural changes in consumer behavior have led to a massive change in market structure as the organized market has grown more than the unorganized market and online ordering channels as expected have grown at a much faster rate than the channels. offline, propelling the growth of delivery and takeout channels. . While in-restaurant and on-site consumption will return, there is growing evidence of additional opportunities and habits in favor of off-site consumption, which will hold and endure even in the post-Covid era. Over the past two years, away-from-home food has become much more acceptable outside of special occasions, especially in smaller towns.
Store expansions and reduction of delivery times
JUBI added a record 230 new stores and entered 48 new cities in FY22. The increased reach helps reduce its average delivery time. Today, over 70% of the company’s delivery orders are delivered in less than 20 minutes and customer satisfaction scores have reached industry-leading levels.
Value for money
JUBI has strived to continually improve its value for money in order to recruit new consumers into the unorganized space (66% of ISPs by value). Through improved process efficiencies and other cost improvement measures, management believes it can deliver high quality meals at an affordable price and even maintain those value prices on a regular basis. of similar products.
Technology and digital
Technology, both client-facing and back-end, will become an increasingly important source of competitive advantage. Recognizing that digital and data strengths must encompass the full breadth of the organization to become an agile, customer-centric enterprise, JUBI continues to make the necessary investments in cloud architecture and the data lake, creating product, engineering and data teams and improving its backend. platforms. It is very interesting to see the enormous work that the company puts into the customer experience before and after order to reinforce a huge gap that JUBI enjoys compared to its peers, because a dominant share of orders are generated from their own app.
Management believes that the Foodservice category has entered an exciting period of sustained growth and that there will be a significant increase in the formation of major brands across multiple cuisines and various categories. As part of its journey to support Domino’s growth, the company has invested in key shared skills and organized learning across the organization that support the entire brand portfolio. These shared competencies are: a resilient and robust pan-India supply chain, digital and data capabilities, business development capabilities and other support functions.
Store expansion roadmap
It is important to consider how effectively JUBI is executing its bold expansion plans, especially given the rapid expansion of the store network for all QSRs.
- The main enablers of the process were predictive modeling and the data-driven site selection approach.
- The site selection team meticulously assesses potential catchment areas and micro-markets by analyzing a range of actionable internal information from the analysis of existing store data as well as external data sources. It helps to derive predictive sales and return patterns around potential sites.
- Delivery polygons and radius are then carefully mapped to ensure travel times in line with defined SOPs.
- Proposed sites are then processed through a layered review and approval process that ensures rigorous checks and helps minimize store churn.
- With appropriate interventions from cross-functional teams, the company was able to reduce the time from inception to store launch.
- Each new store is then evaluated against expected sales and feedback from the entire process is fed back into the system to make further improvements.
Taking advantage of the improved post-Covid opportunity; first choice in the QSR space
JUBI remains our top choice in the QSR space. The company is well positioned to seize the enhanced post-Covid opportunity presented to the QSRs in India, underpinned by its strong triple moats of delivery, value and technology.
JUBI has always had the best business model for QSRs in India, with a focus on delivery (at 70% of pre-pandemic sales). With the additions of technology and “value” moats, the business has only intensified further. Even as ISP players’ reliance on aggregators continues to grow, JUBI remains relatively isolated due to: a) having its own last mile delivery fleet and b) the majority of its orders coming from its own app.
The company also enjoys the best balance sheet, with a RoCE of over 20% for many years now (barring a hit in FY21 due to the pandemic). The strength of the balance sheet also helps fund its profitable store expansions, which are backed by its triumvirate of delivery, value and technology moats.
Buy for a target price of Rs 720
The brokerage said: “We expect JUBI’s EPS to post a CAGR of 23.5% in FY22-24. Given that its new brands, including PLK, are still at nascent stages of development, our forecast does not take into account any significant contribution from any of these companies. The stock is trading at 35.9 x FY24 pre-IND AS 116 EV/EBITDA. not cheap, we believe the company deserves premium multiples for the above reasons We maintain our buy rating and value the stock at 40 x Jun’24E pre-IND AS 116 EV/EBITDA to arrive at our price target of Rs 720.”
The stock was selected in Motilal Oswal’s brokerage report. Greynium Information Technologies, the author and the respective brokerage are not responsible for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.