Jubilant Foodworks: ‘Buy’ with target price of Rs 1,600

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Published: June 27, 2019 12:54:33 AM

JUBI has introduced the new store for-mat at three stores in Bengaluru

jubilant food works, stock marketsMaintain BUY with DCF-based target price of Rs1,600.

Food aggregators’ ramp-up has impacted the causal dine-in segment including the dine-in business for Jubilant Foodworks (JUBI) in the top-10 cities. JUBI has introduced a new store format, designed by Fitch, to arrest this softening growth through enhanced customer experience at its stores. We visited the new store in Bengaluru and came back impressed with the contemporary look and feel, self-ordering kiosks, table delivery, improved lighting, restroom, etc, which makes such stores a differentiated, superior proposition. The new store design, with only limited incremental costs (+7-10%), inspires confidence of driving footfalls in the medium term (once it reaches a meaningful scale in the c.1200 store network). BUY.

JUBI has introduced the new store for-mat at three stores in Bengaluru. The new format is starkly different from the rather functional store setting in the existing stor-es. The self-ordering kiosks, table service, improved lighting, contemporary look and feel, restroom, etc, significantly improve the entire customer experience. The capex for a new design store is only 7-10% higher than the ~Rs10-12mn required for opening a regular store. JUBI will do a phased reim-aging of its existing stores (we estimate 100 stores to be refurbished in near term). At the same time, all the new store expa-nsion is likely to be under the new design.

Majority of store expansion in FY2020 (we estimate 100 store additions) is likely to happen in the existing cities as JUBI looks to split stores operating at peak levels (driven by new customer acquisition and increased frequency from existing customers). Split stores in existing cities speed up ramp-up. The faster ramp-up, combined with not much incremental cost for the new design, is likely to translate into the payback period of new stores remaining intact at around 2.5-3 years.

We model revenue/EBITDA/PAT CAGR of 17% / 20% / 27% over FY2019-2021E. Maintain BUY with DCF-based target price of Rs1,600.

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