Brokerages slash target price on Jubilant FoodWorks despite seven-fold jump in net profit

Despite a significant increase in net profit, brokerages have lowered their target price for Jubilant FoodWorks. The company reported a consolidated net profit of Rs 208.2 crore for the March quarter, a seven-fold jump compared to the previous year. However, the company’s revenue rose by 23.8 percent to Rs 1,572.7 crore, and the EBITDA margin decreased by 210 bps to 6.9 percent. Nuvama Institutional Equities stated that for Jubilant’s valuations to improve further, there needs to be a revival in same-store sales growth, which remains a challenge.
According to the brokerage, Jubilant has implemented various initiatives such as loyalty programs, reducing delivery time, rebranding with IHOP, and improving delivery and order growth. While these efforts are positive, they are not enough to fully satisfy the brokerage. Consequently, the brokerage maintained its hold rating but lowered its target price from Rs 498 to Rs 487 per share.

Morgan Stanley, on the other hand, maintained its equal-weight call on Jubilant FoodWorks but reduced its target price to Rs 427 per share due to the company’s weaker margins and Q4 earnings falling short of expectations. This adjustment implies a potential downside of approximately 11%.

The brokerage also noted that the current operating deleverage cycle has led to significant reductions in estimates, emphasizing that improved underlying demand is crucial for any further recovery.

Similarly, international brokerage Jefferies has also lowered its target price on Jubilant FoodWorks to Rs 475 per share due to the company’s margins reaching multi-quarter lows.
Over the last year, shares of Jubilant FoodWorks have shown a lack of significant movement, with gains of less than one percent. In contrast, the Nifty 50 index, which represents the broader market, has experienced a substantial increase of approximately 23 percent during the same period.