Jubilant FoodWorks Shares Decline Following CLSA Target Price Revision
Shares of Jubilant FoodWorks Ltd. (JUBLFOOD) experienced a nearly 5% drop on Monday, reaching a low of Rs 427.40. This decline occurred after brokerage firm CLSA revised its target price for the Domino's India operator, lowering it from Rs 554 to Rs 550, despite maintaining an 'Outperform' rating.
Q2 FY27 Performance Highlights
The adjustment by CLSA came on the heels of Jubilant FoodWorks' second-quarter (Q2) FY27 results. The company reported a standalone sales growth of 11.5% for the quarter. Domino's India, a key segment, saw its like-for-like (LFL) growth improve to 4.1%, up from 2.5% in the previous quarter.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) increased by 12.4% year-on-year, with the margin expanding by 16 basis points to 19.8%. This operating performance generally met expectations, with EBITDA even surpassing consensus estimates by 39 basis points.
Domino's India Shows Improved Momentum
CLSA noted that Domino's India revenue grew 9.2% year-on-year, driven by a 6.3% increase in order volumes. Delivery revenue saw a significant 11.3% rise, while dine-in and takeaway revenue grew 2.4%. Management has retained its full-year FY27 LFL growth guidance of 5-7%, anticipating an acceleration in the latter half of the fiscal year. New product launches, such as the national rollout of the 'My Meal' offering at Rs 119, along with enhanced beverage and dessert attachments, are contributing to increased ticket sizes.
Resilient Margins Amidst Cost Pressures
Despite facing inflationary pressures of approximately 200 basis points from factors like LPG, minimum wages, and raw materials (including rising cheese and oil prices), Jubilant FoodWorks demonstrated resilient margins. The gross margin expanded by 110 basis points year-on-year to 75.5%. The company's ability to manage these cost increases was attributed to strategic sourcing efficiencies, calibrated pricing, an optimized product mix, targeted discounts, reduced wastage, and technology-driven cost savings.
Why CLSA Cut Its Target Price
Despite the positive operational performance, CLSA's modest reduction in the target price was primarily due to higher projected depreciation and finance costs. The brokerage consequently cut its calendar-year FY27 earnings per share (EPS) estimate by 3%. Despite this adjustment, the 'Outperform' rating signifies CLSA's continued positive outlook on the stock's potential.