Jubilant FoodWorks rebounds from day's low, hit record high post Q1 results

The company said the revenue recovery improved significantly, with a recovery of 69.8 per cent in July and 84.6 per cent in August

Shares of Jubilant FoodWorks hit fresh record high of Rs 2,305, up 2.3 per cent, bouncing back 4 per cent in intra-day trade, on the BSE on Thursday on expectation of margins improvement going forward.

The stock declined 2 per cent to Rs 2,210 in the early morning trade after the company reported weaker than expected April-June quarter (Q1FY21) earnings with same-store-sales (SSS) falling 61.4 per cent and a net loss of Rs 72.6 crore. The company had clocked net profit of Rs 75 crore in the previous year quarter. Gross margins, however, expanded by 350bps year on year (YoY) on low discounting, reduced input costs and delivery charges.

"However, the revenue recovery improved significantly in the months of July and August, with a recovery of 69.8 per cent in July and 84.6 per cent in August. Both the Delivery and Takeaway channels recovered fully by August and delivered a year on year growth, with the Delivery channel growing at 110.9 per cent like-for-like (LFL) and Takeaway at 161.0 per cent LFL," the company said.

The management said the Company enacted several measures to contain the impact of operating de-leverage. Cost-optimization measures like reduction in store operating costs, rent re-negotiation, variabalizing of store manpower cost along with significant cut down of fixed and discretionary expenses helped partially mitigate the adverse impact on profitability, it said.

"Jubilant FoodWorks has the best financial metrics amongst the quick service restaurant (QSR) and with competition facing liquidity issues, its stronger profitability and balance sheet make it well-placed to gain share and boost its growth momentum," analysts at Emkay Global Financial Services said.

The brokerage firm has 'buy' rating on the stock with target price of Rs 2,400, as Jubilant FoodWorks is better placed to benefit from weak competition and gain share, thereby stepping up its growth momentum. Strong growth and margin expansion lead to a 20 per cent increase in our FY22-23 estimates and justify a higher target multiple, it said.

"Three events underpin higher growth and profitability for Jubilant FoodWorks beyond the Covid-19-impacted FY21: (1) the ongoing structural push toward delivery; (2) the introduction of delivery charge; and (3) opportunity created by the crisis to close down 105 of its least profitable (and dine-in dependent) stores. This would lead to all-time high EBITDA margins in FY22, resulting in 33 per cent upward revision in our EPS projections for FY22," Motilal Oswal Financial Services said in result update.

In the past one month, Jubilant FoodWorks has outperformed the market by surging 33 per cent, as compared to 5.8 per cent rise in the S&P BSE Sensex. At 01:19 pm, the stock was trading 1 per cent higher at Rs 2,281 on the BSE, as against 0.06 per cent gain in the benchmark index.