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Bold strategy unveiled: Growth on all front

Jubilant FoodWorks (JUBI IN) unveiled its ‘BOLD’ strategy on its investor day. The strategy expounded on: a) expansion by FY28 (JUBI will add 1000 new stores in over 200 new cities), b) menu innovation, c) margin gain (+200bps in PAT) and d) data-led process for excellence. These reaffirmed our confidence that JUBI will grow in line with industry average. Expect menu diversification and network expansion to prop performance. Free delivery proposition with competitive delivery time has helped JUBI outperform. We raise our FY27E EPS by 6.5%, given upgraded store addition goal. Our SoTP-TP is unchanged at INR 730. Margin gain amid expansion may aid a re-rating – Accumulate.

JUBI’s process-driven approach ahead of the curve:

JUBI’s optimized supply chain yields an edge to achieve sales improvement (sales up 150bps led by overall efficiency). Centralized procurement, backward integrated farm sourcing and strategic locations of commissaries have lowered the impact of inflation on JUBI (stable GM) than for peers. Its hyper-personalized app continues to gain popularity – 13.7mn monthly active users (MAU ‘s) (67% of Zomato’s). Also, the 20-minute free delivery guarantee is backed by the lowest recipe cost and preparation time (~six minutes), offering competition to leading online food delivery platforms and peers. JUBI is investing in four new commissaries to support expansion initiatives.

Healthy expansion to continue despite higher base:

JUBI’s excellence in managing tough deliverables (maintaining robust LFL and store expansion) are noteworthy. Despite a high relative base versus peers, JUBI aims to take its store count to over 3,000 by FY28 (2,139 in Q3), implying a 10.7% YoY store growth CAGR (FY24-28); We are broadly in line with this and estimate 9.9% YoY CAGR through the same period. JUBI uses proprietary AI tools to identify sites and has 1,000-priority sites to expand, thus enabling time saving on ‘site-search’, with focus on securing better rental deals. Expect South India to be prioritized for expansion as JUBI aims to elevate chicken offerings.

Menu innovation to support robust LFL:

JUBI will expand its menu offerings through launching: 1) Big-Big Pizza, 2) Cheesy Rice, 3) wraps, 4) keema egg and 5) new value range – Korean buns and cheese tart. It also aims to build many INR 10bn food revenue categories (Pizza Mania at present). The launches since the past three quarters were incrementally high on chicken-centric menus. This shall elevate throughput per store in South India. As regards Popeyes, rapid expansion in the same will come after stores achieve desired ADS and positive unit economics; we are positive on growth prospects of the fried chicken category, given its low penetration.

Maintain Accumulate; TP unchanged at INR 730:

JUBI’s ‘BOLD’ strategy reaffirms our confidence in its leadership (expansion plans and maintaining robust LFL). JUBI targets double-digit revenue growth and 200bps expansion in consolidated PAT margin by FY28E. We model in 130bps growth in EBITDAM (pre-Ind AS) in FY25E-27E. Our LFL outlook is unchanged, but we raise store addition target to 220/230 in FY26E/27E (200 each earlier), resulting in 2.6% EBITDA upgrade in FY27E. Our SoTP-TP of INR 730 is unchanged. We value JUBI’s standalone business at 36x EV/EBITDA (preInd As) and DP Eurasia at 50x FY27E P/E. Monitor JUBI’s margin expansion (key to rerating amid premium multiple of 95.7x FY27E P/E).

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