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Prabhudas Lilladher Report
We cut our FY23/FY24/FY25 earnings per share estimates by 9.0%/9.9%/11.9% on the back of 3-5% lower system average sales/store, 60-70bps lower Ebitda margins and lower pace of store additions post ~480 store additions over FY21-23.
We believe Q3 FY23 demand pressures are transitionary, however higher competition requires Jubilant FoodWorks Ltd. to increase innovation and consumer value proposition which will limit pricing actions in the near term.
While the scalability of Ekdum, Hong's Kitchen, and Dunkin Donuts remain doubtful, Popeyes is showing encouraging consumer response.
We expect more clarity to emerge with regards to store expansion even though it will take a few more years for it to achieve profits.
Jubilant FoodWorks has significantly underperformed quick service restaurant segment and risk-reward seems favorable at 38 timesFY25 EPS.
We believe Jubilant FoodWorks' strength in pizza market, pick up in demand, and success in Popeyes can change the course over the coming few quarters.
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