Q3FY24 Review: Jubilant Foodworks: LFL growth deteriorates further …

2 Feb 2024 , 01:00 PM

Jubilant (JUBI) reported an in-line yet another weak quarter with revenue growth of 2.9% YoY primarily due to softer demand on non- festive days (1.5% below IIFLe). Ebitda came in-line as margins were slightly better, fuelled by slight improvement in gross margins. Focus on combo offerings and up-trading resulted in highest avg ticket size in 9 quarters which was purely organic as no price hikes were taken in last 6 quarters. Analysts of IIFL Securities cut their adj EBITDA by 1-7% for FY24-FY26 considering another weak performance and maintain ADD. 

In-line results: 

Revenue grew by 2.9% YoY driven by avg. store growth of 10.9% offset partially by 7.2% decline in sales per avg. store. LFL and estimated SSSG of -2.9%/-5.4% worsened further sequentially as demand remained subdued on non-festive days. Ebitda margin of 20.9% contracted by 116bps YoY owing to negative operating leverage. JUBI added only 40 new dominos stores in 3Q impacted by restriction in construction in the NCR, however guidance of opening 200 new dominos store in FY24 was maintained. 

Overall macro environment impacting growth: 

Dine-in channel revenue has still not recovered and was lower by 4% YoY which is contributing to the negative LFL as delivery channel continues its strength with positive LFL. Management mentioned that they gained market share in the last 2 quarters in the pizza category with share of ~69% in revenue terms. Analysts of IIFL Securities believe market share gains and moderating commodity inflation would aid growth and margin recovery going ahead

Cut adj EBITDA by 1-7%: 

Analysts of IIFL Securities downgrade their FY24/25/26 adj Ebitda estimates by 1.4%/6.6%/6.6% factoring the weak Q3; however their reported EPS estimates witness a major downgrade led by lower other income. Analysts of IIFL Securities build in 14%/18%/17% sales, Ebitda and PAT Cagr over FY24-26. They maintain ADD rating on the stock with a target price of Rs540 as analysts of IIFL Securities believe demand revival would kick in sooner than later given overall demand recovery across consumption space, however they could see some pain in the short term.