IGI Logo

JUBI has run-up ~20% in the last 6M in anticipation of growth pick-up. We believe the recent run-up is beyond fundamentals, as our checks suggest that the demand environment has only worsened post Q1 and recovery hopes may further get delayed. From a sporting events perspective, we believe the expected pick-up in the upcoming Q3 needs to be adjusted with 2 big events in the base (T20 and FIFA world cup). Specific to JUBI, the arrest of MoM dip in bill-size is a positive, but muted order growth still remains a bigger challenge. This tallies with our thesis of the pizza category losing its share to chicken /burger and rising competition within the pizza space. Among channels, the dine-in mix remains subdued despite specific offers and store refurbishments. We see scope for reduction in street estimates as we expect Q2 to be broadly similar to Q1. We maintain SELL with a TP of Rs420 (45x Jun-25 EPS).

Channel checks suggest further growth moderation

For Q2TD, our channel checks suggest further worsening of the growth environment, inline with an uncertain demand commentary, given by JUBI’s post-Q1 earnings. JUBI’s focus remains on recouping the share from other categories by leveraging tech and offering a better experience through store refurbishments/faster deliveries. However, the same is not reflected in the improved growth trajectory as the dine-in channel remains impacted, despite focused efforts. Please note JUBI has reimagined over 1,400 stores in pizza theater format, out of the total 1,838 store network at Q1 end. The only bright spot is the arrest of a MoM decline in ticket size, which is likely helped by the launch of the Red Hot Spicy Range (four pizzas at Rs179). In our view, the new launch is helping to premiumize Pizza Mania customers.

Vegetable/Wheat inflation are incremental headwinds

 While dairy prices have seen sequential moderation, the recent spike in vegetable/wheat prices is an incremental challenge that can keep gross margins under check in the near term. Given negative SSG trends and elevated RM prices, we expect the dip in EBITDA margin to continue. On a sequential basis, we expect margins to remain similar to Q1.

Valuations stretched amid slowing growth trends

We currently expect Q2 to remain weak with 30-40% PBT decline. Sequentially, Q2 should broadly follow weak Q1 trends across Revenue/EBITDA fronts vs. 5-10% improvement seen historically under normal operating conditions. Given muted trends and scope for cuts to street estimates, we believe the 20% increase in JUBI’s stock price is a bit exaggerated and has stretched its valuations. Over a 12M timeframe, JUBI’s stock price has lagged benchmarks but underperformance is more due to earnings disappointment and less due to the de-rating. Given the lack of triggers and potential earning cuts, we maintain our SELL rating on JUBI with a revised TP of Rs420 (based on unchanged 45x its Jun-25 EPS).

For More  Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354