Jubilant FoodWorks: Jubilant’s dinner bet puts it in line with Zomato’s goals
Jubilant said it recorded 6.8 million app downloads in the June quarter and that there was a significant increase in its own app’s contribution to delivery sales. Active users also increased for the quarter, he said.
At the same time, the Quick Service Restaurant (QSR) increased its store expansion forecast to 150-175 for fiscal 22 from 135 earlier, despite adding only 29 stores in the first quarter, which suggests that he is betting big on the demand for restoration to come. back soon.
Dalal Street now expects dinner to come back once the country opens up and gives Jubilant a new boost to revenue. But the question is, once consumers start to freely go out again, the frequency of orders. and will the size of the orders decrease? ” JM Financial asked.
Investors would await this response from Jubilant FoodWorks, and more from Zomato, which is expected to trade on Indian stock exchanges in the coming days.
Brokerages like Edelweiss have said
and Zomato, while not strictly comparable, have two things in common: controlling the delivery experience and using customer data to drive growth. They remained largely positive about Jubilant FoodWorks’ intention to become a food technology company and its directions for adding stores.
On Thursday, the stock climbed 8.88% to a high of Rs 3,335 on BSE.
The operator Domino’s reported a net profit of Rs 62.6 crore for the June quarter, compared to a net loss of Rs 72.6 crore in the quarter of last year. Operating income jumped 131% for the quarter to Rs 879 crore as localized lockdowns did not affect businesses in the same way the nationwide lockdown did in the quarter of the previous year . The EBITDA margin for the quarter stood at 24.1%, above analysts’ expectations of 21%.
As indicated, Motilal Oswal Securities raised the stock’s “buy” rating with a target price of Rs 3,630, valuing it at 60 times EPS for September FY23. Edelweiss finds the Rs 3,664 stock worthy as she believes Jubilant’s delivery-focused business model is boosting its industry-leading recovery and isolating it from further disruption from Covid.
Analysts said online food aggregators such as Zomato follow a varied commission structure based on the restaurant’s presence. “While non-chain restaurants pay a much higher commission, outlets that are part of a chain pay less. Commission rates vary between 18% and 40% of the order value, ”they said.
Jubilant FoodWorks, which only uses the app for origination, not delivery, only pays commissions. That said, the business generated by food technology players is naturally at lower margins.
“Although the penetration and diffusion of Jubilant’s applications is a fundamental tenet of its business model, it is fundamentally different from that of Zomato. For Jubilant, the app is a catalyst for its existing store network, while Zomato’s business model centers around its app / website. , which is an important channel for various restaurants, ”said Edelweiss.
The brokerage said that players like Zomato and Swiggy will positively develop the overall order market and believe their promotional and marketing spending may not squeeze Jubilant Foodworks’ margins.
ICICI Securities has an “add” rating on the title with a target of Rs 3,500. Foreign brokerage JPMorgan sees the stock at Rs 3,635 while Citi has a target of Rs 3,315 on the stock.
“Jubilant proceeded with a slight increase in product prices and delivery charges at the end of the first quarter to mitigate the impact of commodity / fuel inflation. Going forward, it expects to maintain its Ebitda margins with plans to invest in digital capabilities, “said Emkay Global, who said tight cost control during the June quarter and management comments on aggressive store additions and the surge of digital and technological initiatives were key positive elements.