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Investment Rationale

 Multi-year growth tailwinds in the QSR space: The organised foodservice market is projected to grow at a 16% CAGR over FY23- 28E, while the chain market, which holds a 43% share, is expected to expand at a 20% CAGR over the same period, outpacing other food segments. This growth will be driven by 1) a younger demographic profile, 2) increasing participation of women in the workforce, 3) consolidation and formalisation in the QSR space, and 4) the entry of new players, further expanding market opportunities.

JUBI is well-placed to capture the QSR opportunity: The company is well positioned to capitalise on the growing QSR opportunity, driven by: a) plans to open 1,000 Domino’s stores, aiming to reach 3,000 stores across 700 cities by FY28, b) strengthening its backend with four new commissaries in addition to the existing eight, c) entry into high-growth categories such as fried chicken and expansion of its cheesy portfolio through innovations, including future launches beyond pizza, such as cheesy rice, Korean buns, and wraps, to drive overall snacking TAM, d) recent product introductions like the Lunch Thali (four-course meal) at Rs 99, Domino’s Cheese Volcano, and new flavours in the Cheese Burst range, which are seeing strong traction in driving SSSG, e) expansion into the fast-growing fried chicken category with Popeyes, targeting 250 stores in the medium term, and f) scaling up Domino’s and COFFY in the fast-growing Turkey market following the acquisition of DP Eurasia, positioning JUBI for sustained growth in the coming years.

Return ratios likely to improve: We expect Revenue/EBITDA to grow at a 14%/28% CAGR over FY24-27E, with EBITDA margins expected to remain in the 19-21% range in the near term. These initiatives are likely to enhance the company's overall return profile, with ROCE improving from 10% in FY24 to 28% in FY27. Given the recent 20% correction in the stock price from its peak and a strong growth outlook, we remain positive on JUBI from a medium to long-term perspective

Valuation / Analyst recommendation: 

Considering robust growth prospects driven by strong industry tailwinds and improving operational metrics, we believe Jubilant FoodWorks offers a promising upside from current levels. We recommend a BUY on the stock with a potential upside of 10% from the CMP.

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SEBI Registration number is INZ000161633

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