Store expansion gathers pace: JUBI’s 4Q print was in line with expectations. Store openings were higher than expected and ahead of guidance: 50 new Domino’s stores (gross) in 4Q (134 in FY2021 versus guidance of 100). JUBI is well placed to accelerate Domino’s store network expansion and investments in new brands offer optionality. We believe JUBI has the potential to transition into a multi-brand QSR with unparalleled network benefits. The company is enhancing organizational capabilities— recent strengthening of the management team is a step in that direction. BUY.

4QFY21 – Steady quarter with in-line revenue and marginal miss on profitability: Revenue grew 14% yoy to Rs10.3 bn in-line with our estimate (+9% 2-year CAGR). Delivery channel grew 28.7% yoy and takeaway grew 76.9% yoy. SSSG stood at 11.8%; system sales recovered to 114.8% in 4Q. With Covid-19 second wave, system sales slowed down to 94.4% and 87.7% in April and May-2021 respectively (versus April 2019 and May 2019). Gross margin stood at 77.5% (KIE: 77.7%). Gross profit grew 19% yoy and 10% on 2-year CAGR basis. EBITDA stood at Rs2.5 bn (KIE: `2.6 bn), 6% below our estimate partly due to higher than estimated store openings. On 2-year CAGR basis, EBITDA grew 30% (reported) and about 9-10% on LFL basis adjusted for Ind-AS 116 adoption. EBITDA margin at 24.3% (KIE: 25.6%) was up 540 bps yoy and down 210 bps qoq. Employee costs increased 2% yoy and other expenses (ex-rent) increased 12% yoy. Net profit was at `1.04 bn (KIE: `1.07 bn). Cumulative app downloads increased to 57.3 m (+ 6.1 m qoq). Online ordering stood at 98.2% in 4Q, stable qoq, up +960 bps yoy. Mobile ordering within online order stood at 97.4 in 4Q, +130 bps yoy.

Store expansion, new brands, own app traffic and profitability: JUBI management called out acceleration in Domino’s store additions— it is targeting at least 134 new stores (gross) in FY2022 notwithstanding the second wave of the pandemic. We expect 150+ net new stores/year thereafter versus the Street’s and our earlier expectations of about 120-125 and 135-140 stores, respectively.

We model higher store growth and revise FV to `3,400 (from `3,200): We raise store growth, tweak estimates and revise FV to `3,400; `2,950 from Domino’s (50X Jun-23E PE, ex-Ind-AS 116) + option value of `450 from new brands/ investments.