Brokerages Lower Target Prices for Jubilant Foodworks Amid Disappointing Margin Guidance
Jubilant Foodworks Ltd., the operator of Domino’s Pizza in India, recently held its first-ever investor meet, outlining ambitious expansion plans across India and Turkey. While the company’s focus on revenue growth and operational improvements was well received, analysts were left disappointed by its modest profit margin guidance. As a result, several brokerage firms have trimmed their target prices for the stock, reflecting concerns over the company’s future profitability.
Key Highlights from Jubilant Foodworks’ Investor Meet
During the investor meet, Jubilant Foodworks unveiled an aggressive expansion strategy that includes:
- Scaling up Domino’s India to over 3,000 stores by FY28.
- Establishing four new commissaries by FY28 to strengthen supply chain infrastructure.
- Expanding Domino’s Turkey to over 1,000 stores, aiming for significant market penetration.
- Positioning its coffee brand, Coffy, among the top three in the Turkish market.
- Focusing on food innovations, value offerings, and infrastructure enhancement to drive growth.
While these strategies indicate a strong push for market expansion, the company’s projection of a mere 200 basis points (bps) increase in profit after tax (PAT) margin over the next three years fell short of expectations.
Brokerage Firms React: Mixed Sentiments on the Stock
Nuvama Institutional Equities: ‘Buy’ with a Lower Target
Nuvama Institutional Equities appreciated the company’s revenue growth focus and scientific approach to expansion but noted disappointment in the margin guidance. The brokerage expected a higher margin expansion, considering the anticipated debt reduction at the consolidated level.
“The only disappointment has been the guidance of merely 200 bps PAT margin scale-up over the next three years. Given the anticipated debt reduction, this increase should have been more substantial. A higher scale-up on standalone margins is crucial for our Sum-of-the-Parts (SoTP) valuation,” said Nuvama.
As a result, Nuvama lowered its target price from Rs 800 to Rs 776 per share while maintaining a ‘buy’ rating.
Emkay Global: Target Price Cut to Rs 750
Domestic brokerage Emkay Global also trimmed its target price from Rs 800 to Rs 750 per share, maintaining an ‘add’ rating.
“The margin guidance leads to a 120-130 bps cut to our margin estimates, impacting our SOTP-based valuation,” the firm noted.
Bernstein Remains Bullish: Target Price at Rs 850
Global brokerage Bernstein took a more optimistic view, maintaining an ‘outperform’ call with a target price of Rs 850 per share. The firm highlighted Jubilant’s strong store expansion strategy, focus on operational efficiency, and technology-driven improvements as key factors supporting future growth.
Aggressive Expansion into Tier-2 and Tier-3 Cities
Jubilant Foodworks is aggressively expanding into smaller cities, where it is witnessing strong demand. The company recently opened stores in Belagavi (Karnataka), Tinsukia (Assam), and Solapur (Maharashtra) and plans to deepen its penetration in cities like Latur, where it is opening its third store.
This expansion strategy aligns with the company’s long-term vision of tapping into India’s growing QSR (Quick Service Restaurant) market, particularly in non-metro regions.
Financial Performance and Key Metrics
Despite the company’s ambitious growth plans, investors remain cautious due to concerns over profitability. Below is a snapshot of Jubilant Foodworks’ key financial ratios:
| Metric | Value |
|---|---|
| Market Cap | ₹44,269 Cr. |
| Current Price | ₹671 |
| 52-Week High/Low | ₹797 / ₹421 |
| Stock P/E | 193 |
| Book Value | ₹33.1 |
| Dividend Yield | 0.18% |
| ROCE (Return on Capital Employed) | 11.2% |
| ROE (Return on Equity) | 13.0% |
| Face Value | ₹2.00 |
| Promoter Holding | 41.9% |
| Debt to Equity Ratio | 1.94 |
| Pledged Percentage | 4.98% |
| QoQ Profits | -35.0% |
| Quarterly Profit Variation | -22.0% |
| Industry P/E | 401 |
| Graham Number | ₹64.7 |
| Intrinsic Value | ₹82.0 |
| RSI (Relative Strength Index) | 44.9 |
| EPS (Earnings Per Share) | ₹5.61 |
| Total Equity Shares | 66.0 Cr. |
| PEG Ratio | -62.1 |
| 200-Day Moving Average (DMA) | ₹634 |
| Free Cash Flow (3Yrs) | ₹824 Cr. |
| Free Cash Flow (Latest Year) | ₹162 Cr. |
| Total Debt | ₹4,242 Cr. |
Conclusion: What Lies Ahead for Jubilant Foodworks?
Jubilant Foodworks’ ambitious expansion plans signal strong growth potential, particularly in tier-2 and tier-3 cities, where demand for quick-service restaurants is rising. However, investors remain wary of the company’s margin trajectory and high valuation, given its P/E ratio of 193 compared to the industry average of 401.
While analysts acknowledge the company’s long-term potential, the downward revision of target prices by Emkay and Nuvama reflects concerns over limited margin expansion and the company’s ability to generate strong leverage from new interventions.
For investors, the key question remains: Can Jubilant Foodworks balance aggressive expansion with profitability? With its strong brand presence and focus on operational efficiency, the company is well-positioned for future growth—but whether it can meet margin expectations will be the key factor determining its stock performance in the coming years.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.