Shares of Jubilant FoodWorks, the company behind Domino’s pizza chain and Popeyes, dipped by more than 2 percent to Rs 433 on March 13th as brokerages offered a mixed assessment of the company’s recent acquisition of Turkey (DP Eurasia) and Bangladesh businesses.
Analysts expressed caution over the company’s increasing debt burden as it seeks to expand its Domino’s and Popeyes outlets in India.
CLSA analysts issued a “sell” rating on the stock with a target price of Rs 439 per share, citing concerns about overall profitability being impacted by significant debt. They also highlighted currency risks arising from cash-flows in Turkish lira and debt in euros.
Meanwhile, Motilal Oswal maintained a “neutral” stance on the stock with a target price of Rs 480, emphasizing the importance of India business recovery for the stock’s performance. Their valuation model values the India business at 55x P/E and the international business at 35x P/E on FY26E.
Based on the financial metrics provided by the company, here is a summary of Jubilant FoodWorks’ performance and expansion plans:
- Standalone Profit After Tax (PAT) in CY23: Rs 260 crore
- International Business (DP Eurasia, Bangladesh, Sri Lanka) combined contributed Rs 140 crore to PAT in CY23
- After adjusting for interest costs, the international business PAT is estimated to be around Rs 100 crore
Jubilant FoodWorks anticipates significant growth and improved profitability for Domino’s Turkey due to various factors including:
- Fast-growing economy
- Potential for margin expansion driven by lower rentals
- Absence of overhang from loss-making Russian operations
- Scalable and straightforward asset-light business model
- Underpenetrated market
Domino’s Turkey currently operates 690 stores, with plans to increase to 1,250 in the medium term. Additionally, the company aims to enter the thriving coffee market in Turkey through its ‘COFFY’ stores, capitalizing on the country’s high coffee consumption, especially in the absence of bars or pubs.
In Bangladesh, Domino’s is the second-largest player in the Quick Service Restaurant (QSR) market after KFC. It currently operates 26 stores and aims to expand to 200 stores in the medium term.
According to analysts at Elara Securities, Jubilant FoodWorks warrants an “accumulate” rating with a target price of Rs 500. The firm highlighted the company’s robust guidance, which includes a medium-term objective of operating 3,000 Domino’s and 100 Popeyes stores.
Elara Securities believes that several factors could serve as potential catalysts for driving upgrades in the medium-to-long term:
- Reduced competitive intensity in the pizza category
- Higher growth prospects for Popeyes
- Improved profitability
- High free cash flow
As of 12:53 pm, the stock was trading at Rs 436.40 on the National Stock Exchange (NSE), marking a decline of 1.93 percent from the previous close.
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