Jubliant Food Works (Consumer sector)
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Emkay Global Financial Services is bullish on Jubilant Foodworks and has recommended accumulate rating on the stock with a target of Rs 645 in its April 7, 2011 research report.
Jubilant FoodWorks (JFL) is comfortably placed to fund Dominos future expansion (Rs 0.6 billion/annually for 70 Stores) and Dunkin' Donuts network (Rs 0.3 billion/annually) from internal cash generation.
“We continue to like the extra topping in Dominos model i.e. gain from under-penetration of QSR (Quick Service Restaurants) in India,
60% market share of pizza delivery market and return generating potential of business model.
India offers all the triggers for sustainable long-term growth in QSR segment i.e.
(1) rising income levels
(2) rising urbanization
(3) rising proportion of workingwoman population and
(4) high percentage of young population.
We expect new store addition of 70 Nos every year for next the 5-7 years, taking the store count from 376 Nos in FY11E to 631 Nos in FY15E.
Also, expect revenue per store to grow at 16-17% CAGR (equal to growth in personal care products) from Rs 22 million/store in FY11E to Rs 40 million/store in FY15E. The model would generate operating cashflow of Rs 1.2 billion in FY11E scaling up to Rs 3.6 billion in FY15E, sufficient to fund store expansion and address new growth opportunity in QSR segment.”
“JFL has identified 2nd growth driver - in the form of Dunkin' Donuts, which would cater to all-day snacking segment.
