Jubilant FoodWorks surges 8%, hits over 2-year high post Q1 results

Secular trends of young population, rising urbanisation, growing affluence, accelerated shifts towards digitalisation and shift in favor of the organized sector

Jubilant FoodWorks (JFL) share price today hit an over two-year high of Rs 645 on the BSE on Monday. Jubilant Food shares surged 8 per cent on the BSE in the intraday trade after the company reported standalone sales growth of 10 per cent year-on-year (Y-o-Y) to Rs 1,440 crore in the June 2024 quarter (Q1FY25), mainly driven by 8.5 per cent growth in Domino's India.

Domino's like-for-like (LFL) growth was 3 per cent, and same-store sales also turned positive (at ~1.5-2.0 per cent) after six quarters. A total of 52 net stores were added across all brands in India.

The stock of the food service company was trading at its highest level since February 2022. In the past four months, the stock price of Jubilant FoodWorks has appreciated 44 per cent. The average trading volume on the counter more-than-doubled with a combined 10.46 million equity shares changing hands on the NSE and BSE till 12:02 pm.

In Q1FY25, JFL's gross margin was up marginally (10bp Y-o-Y to 76.1 per cent), while earnings before interest, tax, depreciation and amortisation (Ebitda) margin contracted 180bp Y-o-Y to 19.3 per cent. This contraction is attributed to increased investments in technology, supply chain enhancements, and adverse operating leverage. Additionally, the company has intensified its value proposition by offering free delivery, Motilal Oswal Financial Services said in its result update.

Weak operating margins were further hit by higher depreciation (investments in backend) and interest costs. Profit before tax (PBT) declined 33 per cent Y-o-Y, and margin came in at 4.7 per cent in Q1FY25.

India business growth, in particular, accelerated with a sharpened value for money focus in Domino's, through delivery fee waiver well supported by continued network expansion. The management said the company remains on track to become India's first foodservice company to cross $1 billion in group system sales.

However, on a consolidated basis, JFL reported a two-fold increase in net profit at Rs 60.8 crore, as against Rs 28.9 crore in Q1FY24. The company's revenue from operations rose 45 per cent to Rs 1,933 crore. Ebitda came in at Rs 383 crore, higher by 38.9 per cent. Ebitda margin was at 19.8 per cent, as against 20.7 per cent in Q1FY24.

According to Motilal Oswal Financial Services, the QSR industry is still reeling under pressure on unit economics. Outperformance of delivery demand has aided healthy traffic growth for JFL. The growth recovery still looks more gradual, and operating print will also lag some quarters for meaningful revision.  Owing to its rich valuation, the brokerage firm has reiterated a 'Neutral' rating on the stock with a target price of Rs 550 per share.

JFL is engaged in wholesale and retail sales of food items through strong international and home grown brands addressing different food market segments across six countries - India, Turkey, Bangladesh, Sri Lanka, Azerbaijan and Georgia. International brands include Domino's, Dunkin' and Popeyes. Homegrown brands are Hong’s Kitchen and COFFY.

The JFL Group believes in the immense long-term potential of the food service category in the under-penetrated emerging markets. Secular trends of young population, rising urbanisation, growing affluence, accelerated shifts towards digitalization and shift in favor of the organised sector, and within that for big, established, credible brands will help aid growth of the Foodservice industry in these markets.