Chinese is the second-most preferred cuisine in India, which itself highlights the demand potential for JFL’s new food segment. Also, the expected price points of Hong’s Kitchen are likely to be reasonable, and awareness and behavioural improvement in consumers toward hygienic food should auger well for JFL’s Hong’s Kitchen.
While demand for the same is dependent on several factors such as taste, quality and promotional support, attractive pricing will help JFL bridge the price gap between low-cost street vendors and premium fine dining Chinese restaurants, believe analysts at Edelweiss Securities. Hong’s Kitchen’s average pricing is almost on a par with its close peer Wok Express. What would also help JFL is its established customer base and their brand loyalty, and learnings from initial failure of its Dunkin’ Donuts, says an analyst.
Given the fact that details about expected investment and store addition strategy among others are not yet known, these could impact JFL’s near-term earnings, caution analysts. Nonetheless, its key Domino’s Pizza vertical should help mitigate the near-term impact, if any.
JFL now has started its everyday value (EDV) offer for a single customer by offering a single pizza at a discounted price. Originally, it was only for two pizzas. Also, JFL is pushing 20-minute pizza delivery against 30 minutes currently. All these should propel same-store sale growth (SSSG) of JFL.
Analysts at Emkay believe that the company’s new initiatives are expected to attract customers from other QSRs (quick service restaurants) as well as address the competition from aggregators such as Swiggy that has started 30-minute delivery guarantee in some areas, indicating significant upside potential for SSSG. Although, with higher base SSG gain could get capped.
SSS growth indicates the change in sales over a particular period of stores that were in existence in the past comparable period. Further, investors can expect profit contribution from the JFL’s Dunkin Donuts that recently achieved its breakeven.
Further, relatively attractive valuation of 45 times FY20 estimated earnings (over 50 in other FMCG majors) offer good buying opportunity to long-term investors.