Macquarie, Morgan Stanley cheer for Jubilant FoodWorks as company doubles net profit in Q2

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Updated: October 27, 2017 10:03:16 AM

Global research firms Macquarie and Morgan Stanley remain bullish on the shares of Jubilant FoodWorks, after the company yesterday announced a two-fold rise in net profit in the latest quarter.

Jubilant Foodworks, Domino Pizza,Dunkin Donuts,  Pratik Pota, Domino Pizza restaurants, Donut-Coffee combosJubilant FoodWorks, exclusive India franchisee of Domino’s pizza, reported over twofold rise in net profit at Rs 48.47 crore in Q2 against Rs 21.56 crore in the corresponding quarter last year. (Image: Reuters)

Global research firms Macquarie and Morgan Stanley remain bullish on the shares of Jubilant FoodWorks, after the company yesterday announced a two-fold rise in net profit in the latest quarter. For the quarter ended 30th September 2017, Jubilant FoodWorks, exclusive India franchisee of Domino’s pizza, reported over twofold rise in net profit at Rs 48.47 crore against Rs 21.56 crore in the corresponding quarter last year. Morgan Stanley has an overweight rating on the shares with a target price of Rs 1,900. Notably the earlier target was Rs 1,780. Jubilant FoodWorks shares were trading at Rs 1,664.95, up by more than 1.35% since yesterday close.

Morgan Stanley’s target price implies an upside of more than 14% from the current market prices. According to Morgan Stanley, the company is likely to sustain its strong Q2 margins. Notably, total income of the company jumped 9.10 per cent year-on-year to Rs 730.28 crore in Q2FY18 over Rs 669.82 crore in Q2FY17. Today, the scrip hit a 52-week high of 1,698. Morgan Stanley has raised estimates by 11-14%, as it believes that Jubilant FoodWorks will sustain its strong Q2 performance.

Track live stock price: Jubilant FoodWorks

Macquarie too maintains an outperform rating on the shares with a target price or Rs 2,005. Macquarie’s target price implies an upside of more than 20% from the current market prices. For FY17-20, Macquarie has increased the EBITDA estimates by 3-8%.

Earlier this month, Macquarie has estimated a rise in same store sales for Jubilant FoodWorks due to the launch of the new campaign with the catchy phrase: ‘The official food of everything.’ Further, Macquarie says that the franchisee will see a strong demand in Maharashtra, with the implementation of Model and Establishment Act, a regulation which seeks to permit eating joints, movie theatres, malls, and local markets to remain open round the clock.

Jubilant FoodWorks, exclusive India franchisee of Domino’s Pizza had a few hiccups last month, after Deutsche Bank raised concerns about news reports bugs being found in Domino’s Pizza seasoning packet, which lead to a near 7% in share price in a single day. The global bank had compared the incident to ‘pesticides in Cola’ faced by Coca-Cola and Pepsi in 2004. Further, Deutsche Bank told CNBC TV18, “Worms in pizza, reminds us of ‘worms in chocolate’ faced by Cadbury in 2003 and ‘lead in noodles’ faced by Maggi.” Soon, Deutsche Bank reiterated its preference for the shares as a top pick in the consumer discretionary space, after the management of Jubilant FoodWorks said that their produce is ‘safe’ for consumption.

Later CLSA too had a buy on the shares. CLSA had revised its target on the stock to Rs 1,900 from its earlier target of Rs 1,600. The brokerage house raised its same-store sales growth and FY19-20 EPS forecasts for the company by 6-12 per cent, while it raised the target PE multiple for the stock to 60 times from 55 times saying it is convinced that the company’s measures will yield results. Jubilant FoodWorks shares have returned more than 92% since January, as compared to BSE Midcap returns of 28% in the same period.

 

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