Jubilant FoodWorks Q4 Results Review - Weak Margin; Focus On Expanding The Store Network: Motilal Oswal

Motilal Oswal Report

Jubilant Foodworks Ltd.’s sales grew 6% YoY to Rs 13.3 billion (in line) in Q4 FY24. Domino’s like-for-like turned positive after four quarters at 0.1% (in line). The delivery business performed well, growing at 12% YoY and increasing its share to 68%, while dine-in sales contracted 6% during the quarter. The waiver of delivery charges shifted dine-in demand to delivery.

Domino’s added 67 new stores and entered 14 new cities in Q4. The company has a store network in 421 cities. The store expansion spree for Domino’s and other brands will continue in FY25.

Due to the ongoing pressure on operational metrics (average daily sales) and reinvestment in the business, including waiver of delivery fees, the operating margin deteriorated further.

Despite gross margin expansion (130 bp YoY to 76.6%), Ebitda margin contracted 100 bp YoY to 19.1%. Weak operating margin was further hit by higher deprecation (investments in backend). Profit before tax declined 45% YoY and margin came in at 3.8% in Q4 FY24.

Consolidated revenue/gross profit/Ebitda was up 24%/26%/25% YoY due to DP Eurasia acquisition. However, higher depreciation (store additions) and interests (debt of Rs 9.5 billion for the acquisition) led to a 42% YoY dip in PBT.

The quick service restaurant industry is witnessing demand challenges; thus, near-term growth metrics will be key monitorables. Reiterate Neutral with a target price of Rs 480.

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