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Jubilant Foodworks gains over 4% on strong Q1, bullish brokerages’ stance

 Global firms highlighted the marked shift in same store sales growth trends and that it was it top pick in consumer discretionary space.

Jubilant Foodworks continued its upmove from Monday, post strong Q1 results, as investors cheered the largely positive review of the earnings by global brokerage houses. The stock gained over 4 percent intraday on Tuesday.

The operator of Domino’s Pizza brand in India posted a net profit for the June quarter at Rs 24 crore beat the Street expectations, posting a rise of 25 percent year on year.

The company’s revenue from operations witnessed a rise of 11.5 percent to Rs 679 crore against Rs 609 crore in the same period last year, while earnings before interest, taxes, depreciation and amortisation (EBITDA) came in at Rs 79.6 crore, a rise of 37.8 percent from Rs 57.7 crore. The operating margin, meanwhile, came in at 11.7 percent against 9.5 percent year on year.

The same store sales growth, a key metric for gauging the progress of the company, was reported at 6.5 percent, a huge jump from its previous performance of -7.5 percent. Analysts had expected this figure to be between 3 and 4 percent.

Global brokerage houses Macquarie and Morgan Stanley were bullish on the stock post the Q1 trends and see it as one of their top picks in the space. Having said that, there were a few sell or neutral calls as well, but are waiting for subsequent quarter performance.

Moneycontrol takes a look at what are brokerages talking about the stock.

Brokerage: Morgan Stanley | Rating: Equal-weight

The research firm highlighted the management commentary of maintaining its current same store sales growth trend for the current fiscal. These views, it said, are seen as a marked shift. The short term prognosis is undoubtedly strong for the company, he added. The key pivot of improvement is ‘Everyday Value’ offer on core pizza offerings.

Brokerage: Macquarie | Rating: Outperform | Target: Rs 1,465

Macquarie said that the company was its top pick in the consumer discretionary space. It is building in 30 percent CAGR EBITDA growth for FY17-20.

Brokerage: Kotak Institutional Equities | Rating: Sell | Target: Rs 900

The brokerage firm said that the PAT at 5-year high underscores the cyclical nature of the business. It will refrain from going overboard on the short term prognosis and values the stock at 32 times June 2019 earnings per share (EPS) estimates.

Brokerage: Ambit | Rating: Sell | Target: Rs 822

The brokerage said that the valuation of 58 times FY19 EPS is expensive and that the SSSG was no longer a key margin driver.

Brokerage: Nomura | Rating: Reduce | Target: Rs 919

The research firm said that the valuation was running ahead of a recovery and that core business challenges remain.

Brokerage: Citi | Rating: Sell | Target: Rs 935

Citi termed the company’s Q1 operating profit to be in line with estimates and that the stock was already pricing in the recovery.

Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 1,400

The global financial services firm said that the company’s June quarter performance was driven by higher number of orders and increase in transaction size. The company said that it was its top pick in the consumer discretionary space along with Titan.

At 10:07 hrs Jubilant Foodworks was quoting at Rs 1,298.50, up Rs 23.95, or 1.88 percent on the BSE.
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