Jubilant FoodWorks - Slicing, Stirring Up Dessert, Beverage Portfolio; HDFC Securities Maintains 'Add'

HDFC Securities Institutional Equities

Domino’s India management has been very aggressive with new product launches over the past few months to revive same-stores sales growth, while also maintaining excitement among its core target audience, given its legacy as a brand with nearly 30 years of presence.

So far, most of the new launches in the core pizza segment have garnered a strong response:

1. the launch of the Lunch Meal at Rs 99 for the dine-in channel,

2. the differentiated Volcano Cheese Pizza,

3. the launch of Flavoured Cheese Burst Pizza after almost 15 years, and

4. Cheesiken (a combination of cheese, rice, and chicken), initially launched in selected southern states before being extended to a pan-India basis.

However, despite these initiatives, Jubilant FoodWorks Ltd. has hardly made any significant moves in the small but high-potential segments of desserts (2-3% of overall sales) and beverages (4-5% of overall sales).

We believe the company is now focusing on its desserts and beverages portfolio through:

1. the introduction of an ice cream portfolio at highly competitive prices in select outlets to strengthen the dessert range, and

2. switching from Pepsi to Coke, given the latter’s stronger product portfolio.

We believe these initiatives will further support SSSG recovery. We maintain an Add rating with a target price of Rs 690 (SOTP-based valuation).

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