On Thursday, Elara Securities India adjusted its stance on Jubilant Foodworks Ltd (JUBI:IN), downgrading the stock from Accumulate to Reduce and revising the price target to INR460.00 from INR500.00.
The firm noted that Jubilant FoodWorks experienced a like-for-like (LFL) sales decline of around 1.4% year-over-year in the fiscal year 2024. Still, there was a slight improvement in the fourth quarter of FY24, with LFL growth turning positive at 0.1% year-over-year, indicating market share gains in the pizza segment during the same timeframe.
The report highlighted a decrease in EBITDA margin by 100 basis points year-over-year to 19.1% in Q4FY24, even though gross margins saw an increase of 130 basis points year-over-year due to a stable inflationary environment. This margin decline was attributed to the company's efforts to improve market share, possibly at the cost of lower profitability.
Jubilant FoodWorks, which operates Domino's Pizza (NYSE:DPZ) in India, has set a target of opening 180 new stores in FY25, reflecting a 9% year-over-year growth in store count. Moreover, the company plans to expand its other brands, aiming to open 50 new Popeyes stores and 25 new Hong’s Kitchen outlets in the same fiscal year.
The firm anticipates that Jubilant FoodWorks will continue to see momentum in its delivery channel, supported by a superior delivery experience, which promises delivery times under 20 minutes, and the absence of delivery charges.
Conversely, the dine-in segment may face challenges, as dine-in revenue fell by 3% year-over-year in FY24. Despite modernization efforts for existing stores, Elara Securities does not foresee a significant acceleration in dine-in sales for the company moving forward.
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