The overall earnings would also get support from Dunkin’ Donuts, which achieved break-even in 2018-19, and Hong’s Kitchen, a new Chinese cuisine format launched by Jubilant.
Long-term investors will have to be patient, with the likely softness in near-term growth. Factors such as high competitive intensity and slowing discretionary consumption are likely to keep near-term SSSG under check. This could also weigh on the company’s profitability and overall earnings, as SSSG has a direct bearing on profitability of retailers and quick service restaurants.
In Q1, Jubilant disappointed the Street with an SSSG of 4.1 per cent, against 14-17 per cent average quarterly SSSG in FY18-FY19. Higher base of about 26 per cent in the year-ago quarter, store splits, and lower dine-in footfall had weighed on SSSG in the June quarter.
According to Priyank Chheda, analyst at Reliance Securities: “Heavy discounts and multiple options by online food aggregators and weaker consumption sentiments in the discretionary space would lower Jubilant’s SSSG in the ensuing quarters.” The broking firm has a ‘sell’ rating on the stock.
Nonetheless, the festive season is expected to reverse the slowing consumption trend to some extent. Price hikes taken by the company at the end of Q1 to mitigate high input cost pressure should also support profitability.
According to a Bloomberg consensus, 23 of the 31 analysts polled have a ‘buy’ rating on the stock. Their reduced average target price (from Rs 1,560 in May to Rs 1,378 now) still suggests around 15 per cent upside in the stock, from the current levels of Rs 1,196.