Jubilant FoodWorks profit more than triples in June quarter on higher margins

Jubilant Foodworks posts stellar number in Q1FY19

Jubilant FoodWorks Ltd, which operates Domino’s Pizza and Dunkin’ Donuts outlets in India reported strong Q1 numbers. Superior products and value deals coupled with growth in Dunkin donuts led to the high profitability this quarter which tripled on yoy basis.

Analysis of the result

  • Net revenues increased by 26% yoy to Rs 855.06 crores in Q1FY19. Sequentially, revenues grew by 9.6%.
  • Total expenses in the quarter ended 30 June 2018 rose by 19% to ₹713 crore as raw material cost jumped 35.7% during the quarter under review.
  • EBITDA for the quarter grew by 78.5% yoy to Rs 142 crores. Operating margins improved substantially by 490 bps yoy to 16.6%. Good control on fixed costs couple with high revenue growth led to margin expansion.
  • Net profit tripled from Rs 23.8 crores in Q1FY18 to Rs 74.68 crores in Q1FY19. Net profit margins expanded by 520 bps yoy to 8.7%, driven by higher operating margins and lower depreciation.

Key Insights

  • Same-store sales growth (SSSG) which is a key operating measure for retail chains was marginally lower for Dominos as compared with the immediate past quarter at 26.5% (the highest ever in six years). However, on yoy basis SSSG grew by 25.9%.
  • During the quarter, the company added 13 Domino’s outlets, and closed three, taking the total store count to 1,144. It closed one Dunkin outlets and added one during the quarter.
  • The strong performance in Q1 was driven by a good response to the Every Day Value offer and product upgrades.
  • As per management, Dunkin’ Donuts saw encouraging growth and made good progress towards profitability on the back of successful innovations and disciplined cost management.

Valuation and view

At the CMP of Rs 1412, Jubilant Foodworks Ltd. (Mcap: Rs 18,608 crores) is trading at a FY20E P/E of 42.8x which is quite expensive in our view. However, we expect the growth momentum to continue on back of new products, value deals, good store additions and Dunkin donut witnessing growth. Hence, we recommend a “HOLD”.

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