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Jubilant Q4 a treat, brokers want bigger bite of company

CLSA, while maintaining ‘buy’, raised target price on the stock to Rs 3,150 from Rs 2,800.

, ET Bureau|
Updated: May 10, 2018, 10.11 AM IST
Mumbai: Brokerages have raised target prices by up to 20 per cent on Jubilant FoodWorks after the company reported a 10-fold increase in standalone net profit for the March quarter. CLSA, while maintaining a ‘buy’ rating, raised target price on the stock to Rs 3,150 from Rs 2,800, an increase of 12.5 per cent. Phillip Capital, HSBC, Jefferies and Edelweiss increased target prices by 10.7-19 per cent. The biggest increase came from Kotak Institutional Equities, which raised target price by 20 per cent to Rs 3,000. Shares of Jubilant FoodWorks ended down 0.2 per cent at Rs 2,556.05 on Wednesday after rising as much as 3 per cent during the session.

The firm said 150 per cent share-price rally in the past 12 months may induce investors to take profits in Jubilant FoodWorks but it is keeping faith in the company and raising target price. CLSA expects strong same-store sales growth and margin expansion driving a strong 40 per cent-plus compounded growth in earnings per share over FY18-FY20. CLSA said it likes the management’s acute focus on growth and efficiency. Analysts are bullish on the company’s growth momentum continuing due to its focus on cost discipline and value offerings.

Upgrading Jubilant to ‘buy’ from ‘hold’, HSBC said the stock can continue to perform strongly though it has run up sharply in the past year. Owing to the company’s focus on cost discipline and customer value proposition, growth momentum is likely to continue in the current financial year, said HSBC. Jubilant trades at FY20 estimated EV/EBITDA of 23.4 times, which still appears significantly below the other structurally attractive network rollout stories such as Titan and Avenue Supermarts, it added.

The domestic brokerage firm estimates a 12.1 per cent year-on-year growth in same-store sales growth and 354 basis points expansion in EBITDA margin in FY19 due to the company’s focus on cost rationalisation, innovation in menu and value offerings. However, it has maintained rating as it sees limited upside from current levels in Jubilant FoodWorks’ stock.

The brokerage said Jubilant FoodWorks has managed to strike the fine balance between regaining its value-for-money positioning without sacrificing margins, which is commendable. Kotak Institutional Equities has raised its FY19-FY21 EPS estimates on Jubilant FoodWorks by 5-9 per cent.

Jubilant FoodWorks provides a favourable risk-reward for long-term investors because of its great combination of double-digit same store sales growth, focus on extracting cost synergies, vigour of the new management that will drive 34 per cent compounded growth in profit after tax over FY18-FY21 period, said Phillip Capital. It will also drive a sharp improvement in return profile of Jubilant FoodWorks, the brokerage added.

Jubilant Food Snip

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