Buy Jubilant FoodWorks Ltd For Target Rs.625 by Motilal Oswal Financial Services Ltd
India growth improving; cost efficiencies negating inflation
* JUBI reported 11% YoY standalone revenue growth in 2QFY27 (in-line). Domino’s LFL growth improved to 4.1% (2.5% in 1QFY27) despite a high base of 9%. Order growth was at 6.3%. Delivery revenue grew 11.3%, and DITA revenue returned to growth at 2.4% after a prolonged period of weakness. Popeyes continued its strong performance, with revenue growth of 122% and LFL growth of 53%. The company is targeting 5–7% Domino’s LFL growth in FY27, with 3Q performance currently on track to meet company plans.
* Gross margin expanded 110bp YoY to 75.5% supported by pricing, better mix, supply chain efficiencies, and lower wastage. Despite inflation in LPG, labor, cheese, oil, and chicken, a 140-200bp calibrated price increase and productivity initiatives limited the margin impact. EBITDA Pre-Ind AS margin expanded 10bp YoY to 12.4% (est. 11.9%), while EBITDA grew 12% (beat).
* DP Eurasia revenue grew 13%. Domino’s Turkey LFL declined 2% and Coffy LFL declined 19% (inflation-adjusted). PAT margin stood at 9.2% (vs 10.4% in base). Domino’s Sri Lanka and Bangladesh reported moderation in revenue growth of 9% and 12% YoY, respectively.
* We remain positive on JUBI’s medium-term outlook, supported by 5-7% LFL growth potential, strong Popeyes momentum, and healthy international performance. The company is also progressing on margin recovery, with productivity gains, supply chain efficiencies, and calibrated pricing helping offset commodity inflation. We model standalone revenue CAGR of 13% revenue CAGR over FY26–28E and pre-Ind AS EBITDA margin of 12.5-13.5%. We reiterate our BUY rating on the stock with TP of INR625, valuing the India business at 27x EV/EBITDA and international business at 15x EV/EBITDA on Sep’28E estimates.
Highlights from the management commentary
* Delivery revenue grew 11.3% YoY, with delivery mix at 75.8%, while DITA revenue returned to 2.4% YoY growth, marking the first quarter of positive growth after a prolonged period of weakness.
* The DITA turnaround program focuses on three key areas: improving the instore experience through refurbishment, offering better value for dine-in and takeaway customers, and strengthening customer engagement through CRMled local marketing.
* The company maintained its guidance of opening 1,000 stores across brands in India between FY26 and FY28.
* For Popeyes, the company has identified locations for the next 150 stores, taking the network to 250 stores and supporting its ambition of building Popeyes into a INR10b brand over the next 3–4 years; the current expansion pace remains around 40–45 stores annually.
* Management continues to target around 200bp of EBITDA margin improvement, with roughly half expected from Domino’s and half from emerging brands
Valuation and view
* There are no material changes to our EBITDA estimates for FY27 and FY28.
* JUBI’s focus on customer acquisition and order frequency has been driving strong delivery growth. For dine-in, the company continues to take various steps, such as value offerings and product innovations, to drive channel growth.
* We remain positive on JUBI’s medium-term outlook, supported by 5-7% LFL growth potential, strong Popeyes momentum, and healthy international performance. The company is also progressing on margin recovery, with productivity gains, supply-chain efficiencies, and calibrated pricing helping offset commodity inflation.
* We model standalone revenue CAGR of 13% revenue CAGR over FY26–28E and pre-Ind AS EBITDA margin of 12.5-13.5%. We reiterate our BUY rating on the stock with a TP of INR625, valuing the India business at 27x EV/EBITDA and international business at 15x EV/EBITDA on Sep’28E estimates.
For More Research Reports : Click Here
For More Motilal Oswal Securities Ltd Disclaimer
http://www.motilaloswal.com/MOSLdisclaimer/disclaimer.html
SEBI Registration number is INH00000041
