Reduce Jubilant Foodworks, target price Rs 1758: HDFC Securities

Jubilant Foodworks Ltd., incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 30036.81 Crore) operating in Tourism & Hospitality sector.

Promoters held 41.94 per cent stake in the company as of Jun 30, 2020, while FIIs held 36.19 per cent, DIIs 15.67 and public and others 6.20 per cent.
HDFC Securities has given a reduce rating to Jubilant Foodworks with a target price of Rs 1758. The share price moved up by 0.73 per cent from its previous close of Rs 2252.25. The stock’s last traded price is Rs 2268.65.

Jubilant Foodworks Ltd., incorporated in the year 1995, is a Large Cap company (having a market cap of Rs 30036.81 Crore) operating in Tourism & Hospitality sector.

Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 388.41 Crore, down 57.26 % from last quarter Sales of Rs 908.75 Crore and down -59.08 % from last year same quarter Sales of Rs 949.11 Crore Company has reported net profit after tax of Rs -74.48 Crore in latest quarter.

jubilant-graph1

Investment Rationale
Jubilant FoodWorks (Jubilant) clocked weak show amidst COVID led lockdown. Revenue declined by 60% YoY with negative SSG of 61% YoY (HSIE -54%). Recovery in July/Aug at 70/85% is encouraging as dine-in pressure remained high. Jubilant is capitalising the situation (weaker competition, delivery friendly demand, and increase in delivery fee by aggregator) by charging delivery fee (Rs 30/order). It will support operational performance in FY21. Cost control initiatives have resulted into positive EBITDA of Rs 241mn vs. loss of Rs 423mn by Westlife. The brokerage believes benign raw material prices, soft rental cost and sustained delivery fee will drive the EBITDA margin in ensuing quarters. It has changed EPS estimate by -9/+15/+12% for FY21/22/23. It has increased target P/E multiple to 45x (42x earlier) to factor-in faster recovery and potential share gain. It maintains REDUCE rating with TP of Rs 1,758.

Promoter/FII Holdings
Promoters held 41.94 per cent stake in the company as of Jun 30, 2020, while FIIs held 36.19 per cent, DIIs 15.67 and public and others 6.20 per cent.
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