Besides the closure of mall stores, higher chances of cancellation of key events, such as the Indian Premier League, will pull down Jubilant’s top line, say analysts. This, along with the higher share of fixed-cost (approximately 60 per cent of the overall cost structure), will directly take a toll on its earnings.
With just 14 days of the lockdown
falling in the June quarter, analysts at PhillipCapital estimate around 25 per cent decline in Jubilant’s same-store-sales growth (SSSG, a key performance indicator for retailers) in Q1, and 21-35 per cent earnings cut for FY21-FY22. This sufficiently indicates potential damage to Jubilant’s performance in the event of a prolonged lockdown.
Nonetheless, even after the lockdown, how the demand for discretionary food like pizza and burger pans out is still a question. Pay cuts, job losses, and preference towards home-made food could eat into the overall demand for such non-essential food items. Even now, the company has witnessed pressure on delivery in recent times, according to HDFC Securities.
Further, promoter stake sale and exuberance among online delivery players to grab market share are some other risk factors for Jubilant, say analysts at PhillipCapital, which believes the near-term pressures are priced in.
What though offers comfort is Jubilant’s debt-free balance sheet, good cash position, and strong brand equity.
For now, investors may be better off waiting for clarity to emerge on the lockdown and a revival in delivery demand, as the stock’s current valuation of 46x its FY21 estimated earnings is still not attractive, given the current scenario.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.