Jubilant FoodWorks slammed by investors due to weak SSSG expects strong growth in remaining FY22

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Jubilant FoodWorks', #Jubilant Foodworks Q2, #Jubilant FoodWorks second quarter results

Domino’s Pizza outlet. (PC-Facebook)

The food service industry, backed by strong momentum in deliveries and takeaways, is out of the woods and poised for strong growth, Jubilant FoodWorks’ management told investors while announcing second-quarter results.

“The Indian economy has continued to make solid progress and we see the foodservice industry set for strong growth in the remaining quarters of this year,” co-chairman Hari Bhartia said.

According to Bhartia, while 95 percent of the company’s stores were operational during the quarter, it witnessed a noticeable uptick in demand in the quarter ended September that made up for closed stores. The company’s growth in the quarter, he added, was driven by strong growth in the delivery and takeaway channels while dine-in showed signs of recovery though still below pre-COVID levels.

While the company may be upbeat about the future, its performance for the September quarter failed to impress analysts due to below-than-expected same-store sales growth and like-for-like sales for new stores. Jubilant FoodWorks, which runs quick-service restaurants (QSRs) such as Dominos and Dunkin Donuts, reported a strong growth in revenue and net profit during the quarter.

Second-quarter results

The company reported a 58 percent year-on-year (y-o-y) jump in its consolidated net profit to Rs 120 crore in Q2FY22 against the Rs 76 crore reported in the corresponding period last fiscal. Revenue during the period also climbed by 37 percent y-o-y Rs 1,116 crore compared with Rs 816 crore last year.

The company registered growth sequentially too. Its quarter-on-quarter consolidated net profit shot up by 90 percent, while revenue was up 27 percent. The company had reported a net profit of Rs 63 crore in Q1FY22 and revenue of Rs 879 crore.

Its delivery and takeaway businesses saw a 36.8 percent and 72.2 percent growth, respectively, in Q2FY22 versus the same quarter last fiscal. Dine-in recovery, however, said CEO Pratik Pota, was muted during the quarter at 46.9 percent.

“While we are present across geographies, the growth was much stronger in smaller towns and non-metros,” he added.

The company also added 55 new stores during the quarter and entered nine new cities. It now has 14,354 stores in the country, across 307 cities. The company also crossed the 1,400-store milestone for Domino’s in India.

“India is the first country outside of the US to have opened more than 1,400 outlets,” said Bhartia. Jubilant FoodWorks sees the potential to open about 3,000 Domino’s stores in the country.

Same-store sales growth, however, was flat in the quarter, which has concerned some analysts. It stood at 26.3 percent against the expectation of 30-35 percent. The company’s like-for-like sales growth at 29 percent during the quarter also failed to cheer analysts.

The company’s stock fell over 8 percent after the results on Wednesday. On Thursday, Jubilant FoodWorks was down 3.03 percent below at Rs 3,845 on the BSE.

A mixed reaction

Other analysts, however, said the company’s performance beat expectations and are upbeat about it in the quarters ahead.

“The stock market correction yesterday is not linked with the company’s performance in Q2. It is a near-term market reaction on account of profit booking,” said Abneesh Roy, executive director, Edelweiss Securities.

According to Roy, the quarter ahead for the company looks bright, especially as restrictions further ease in states like Maharashtra. Edelweiss Securities maintained its ‘buy’ rating on the stock.

ICICI Securities, too, maintained its ‘add’ rating on the stock, but slashed FY22 earnings estimates by 8-10 percent. “Maintain ‘add’ with DCF-based revised target price of Rs 4,200 (was Rs 3,500 earlier) as we roll forward. The key downside risk is raw material costs turning inflationary,” it said.

Jefferies downgraded it to ‘hold’ with a revised price target of Rs 4,100.

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