HDFC Securities recommended reduce rating on Jubilant FoodWorks with a target price of Rs 1758 in its research report dated September 03, 2020.
HDFC Securities' research report on Jubilant FoodWorks
Jubilant FoodWorks (Jubilant) clocked weak show amidst COVID led lockdown. Revenue declined by 60% YoY with negative SSG of 61% YoY (HSIE -54%). Recovery in July/Aug at 70/85% is encouraging as dine-in pressure remained high. Jubilant is capitalising the situation (weaker competition, delivery friendly demand, and increase in delivery fee by aggregator) by charging delivery fee (Rs 30/order). It will support operational performance in FY21. Cost control initiatives have resulted into positive EBITDA of Rs 241mn vs. loss of Rs 423mn by Westlife.
Outlook
We believe benign raw material prices, soft rental cost and sustained delivery fee will drive the EBITDA margin in ensuing quarters. We change our EPS estimate by -9/+15/+12% for FY21/22/23. We increase target P/E multiple to 45x (42x earlier) to factor-in faster recovery and potential share gain. We maintain REDUCE rating with TP of Rs 1,758.
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