Jubilant Foodworks delivers robust growth in FY22

One the largest foodservice provider in India is Jubilant Foodworks Limited (JFL), a multi-brand owner and a member of the Jubilant Bhartia group. Domino’s Pizza Inc. has granted JFL, the exclusive master franchise rights to build and manage the Domino’s Pizza brand in India, Sri Lanka, Bangladesh, and Nepal.

JFL operates 1,567 Domino’s restaurants in 337 cities around India, making up a robust and vast network. The company operates in Sri Lanka and Bangladesh through its wholly owned subsidiary, which now has 35 and 9 restaurants, respectively. Additionally, JFL has the unique right to build and run Popeyes® restaurants in India, Bangladesh, Nepal, and Bhutan. Currently, JFL runs 4 Popeyes restaurants in Bengaluru in addition to 28 Dunkin’ Donuts locations throughout 8 Indian cities.

In its recently released results for Q4FY22, despite numerous uncertainties, regular disruptions, and a high inflationary environment, the company managed to set a record for revenue, profitability, and network expansion in FY22 due to increased investments and the unwavering spirit of its three partners. Let’s analyse what lies ahead for JFL.

Robust Growth in Q4FY22 on account of strong growth in orders

The company’s sales increased by 12.90% YoY to Rs 1,157.90 crore in Q4FY22 from Rs 1,025.90 crore in the same quarter last year. Jubilant’s PAT increased by 11.30% YoY to Rs 116.50 crore for Q4FY22 from Rs 104.30 crore in Q4FY21. The Omicron wave in January and February of 2022, however, has caused a minor decline in both earnings and revenue when compared to QoQ growth. On a consolidated basis, however, the company has maintained a similar performance throughout each quarter of FY22, with the exception of a decline in Q1FY22 which was brought on by the second wave of the pandemic.

 

 

JFL posted its highest-ever annual profits and sales figures in FY22, according to the consolidated numbers for the financial year of 2022. Even though covid had an impact on the company’s YoY growth in FY22, 33.4% was still a healthy number. They have made notable investments in areas that will serve as additional development drivers for the business and generate significant value for stakeholders in addition to the outstanding progress seen in their main business.

 

 

Although there was a lot of uncertainty in the operating environment throughout the year, there were sporadic disruptions, and on the other hand, there was a high inflationary environment that put significant cost pressure on the company. Nevertheless, the company was able to maintain strong margins throughout all the quarters.

 

 

Quarterly and full year results were also particularly strong for international markets, where they delivered healthy system sales growth and expanded their store network. Despite the challenging geopolitical and macroeconomic situation in Sri Lanka, activities continued without interruption, and JFL produced a successful quarter. They took significant action in Bangladesh to enhance their ownership position in the Bangladesh subsidiary to 100%. This will greatly aid them in quickening the rate of business growth.

Record opening of 80 new Domino’s Pizza stores in Q4

They opened the highest ever 80 new stores in a quarter for Domino’s India and entered 17 new cities, thereby enhancing reach to 337 cities. They also added 230 new stores and entered 48 new cities in FY22. They intend to continue with this new pace of network expansion and plan to open around 250 new stores in the FY23.

 

 

Popeyes, which serves Bengaluru consumers across its 4 stores, is receiving a good response. The management is confident that Popeyes will help them build yet another profitable, sizable and scalable business. In the medium term, they see a potential of opening around 250 to 300 stores.

To accelerate their expansion goals, Domino’s is also increasing their presence in existing covered cities by splitting up their stores. This will enable to them to better serve their customers and increase their customer base.

 

 

Future Outlook

The business also appointed Sameer Khetarpal as CEO. Pratik Pota, who resigned in March 2022, is replaced by Khetarpal, who joins from Amazon. The next CEO’s plan will likely include a multi-brand, multi-country approach, the use of technology to boost productivity, and the use of digital tools to improve communication and comprehension with customers.

Jubilant Foodworks is constructing their own brands as well. Hong’s Kitchen, JFL’s first owned restaurant brand, was introduced in the Chinese cuisine market in 2019 and now has 15 locations across 4 cities. 2020 saw the introduction of Ekdum!, a brand-new owned restaurant that specialises in Biryani. In 3 cities, Ekdum! has 9 eateries. With its “ChefBoss” line of sauces, gravies, and pastes, the company has also entered the ready-to-cook market.

The new brand is part of the company’s strategy to expand its portfolio in India’s food services market that has diversified to include home-deliveries, dine-ins and takeaways. It is also filling gaps in cuisines that are popular among Indian diners. JFL has also tried to capitalize on the growing instances of in-home cooking as the pandemic led to rise in demand for ready-to-cook meals and dishes.

They also aim to “transform itself into a food-tech powerhouse” for which the company is undergoing a digital transformation with an eye on capturing the “likely high growth in deliveries and takeaways.”

Technical Analysis: In a downtrend since the last six months

With the 50 DMA below the 100 & 200 DMA, the business is currently trading close to its 52-week low. The next few weeks will determine whether the stock touches the lower levels again or is headed higher marking the start of a new uptrend.

While a strategy for store expansion and the hiring of a new CEO are positives from a growth viewpoint, concerns about margins could prolong the short-term downward pressure on the stock.

 

 

Our View:

Inflationary pressures could a point of worry for the company in the short term, while in the long-term company is planning to expand its network as well as stores across India. They have also launched several new brands in the past years and plans to expand them as well in medium term. If things go as per the management plans, the stock could resume an uptrend from here on and deliver above average returns over the next one year.