Jubilant FoodWorks hits 52-week high; stock up 45% in three months

Jubilant Foodworks (Source: Wikipedia)
Jubilant FoodWorks, which runs Domino's and Dunkin' Donuts outlets, hit  fresh 52-week high of Rs 1,552, gained 5% on BSE in intra-day trade, extending Thursday’s 5% gain, on expectation of revival in same-store sales growth (SSG) during the current financial year 2017-18 (FY18).

The stock was trading at its highest level since December 2015. In past three months, it rallied 45%, as compared to 1% rise in the S&P BSE Sensex.

According to media reports, analyst at Morgan Stanley upgraded the recommendation on Jubilant Foodworks to overweight from equalweight.

The board of directors of Jubilant FoodWorks has been scheduled to meet on Thursday, October 26, 2017, to consider the standalone unaudited financial results of the company for the quarter ended September 30, 2017 (Q2FY18).

For the quarter ended June 30, 2017 (Q1FY18), the company had posted a better-than-expected SSG of 6.5%.

“Closure of loss-making stores could improve Jubilant FoodWorks’s margin in the coming years. We expect efficient store expansion to result in improved SSG,” analyst at HDFC Securities said in Q1FY18 results review.

“Over FY17 Jubilant FoodWorks closed 14 Dominos and 20 Dunkin restaurants. Store expansion will be tempered in the immediate future in view of slow revival of consumer sentiment and focus on profitable growth. Calibrated new store additions (40-50 new Dominos additions in FY18) and proactive decision to shut unviable stores would also lower the cannibalization effect on SSSG for existing stores,” the brokerage firm JP Morgan said in annual report takeaways.

We expect SSG to revive to 7-8% levels (vs nearly flat levels over the past four years), driven by improved value positioning (e.g. Every Day value Offer) to drive new customer additions/better order frequency, new menu introductions (e.g. chicken sides, premium pizza variants) to add to the transaction size, improved brand perception (moving away from deep discounting, better quality etc.) and continued investments in technology (rising online contribution). We note that this revival is based largely on Jubilant FoodWorks own efforts and any meaningful uptick in consumer sentiment would further add to these growth rates, added report.

At 2:42 pm, the stock was up 4% at Rs 1,538 on the BSE, as compared to 0.56% rise in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 2.76 million shares changed hands on the BSE and NSE so far.

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