Jubilant FoodWorks - SSG Back, Retain Accumulate - Emkay

- Q3FY12 results beats estimates – Revenues grew 49% yoy to Rs 2.8bn driven by 30% yoy same store sales growth. Despite extraordinary cost, APAT grew 56% yoy to Rs 295mn

- SSG grows at 30% is above expectations. Retain SSG growth assumption at 20% for FY13E. Store addition strong as 28 stores added this quarter

- JFL well on track with the launch of Dunkin Donuts; incurred another Rs 9mn pre-operative expenditure for developing backend operations. To launch first outlet in Q4FY12

- Continue to remain positive on its robust business model with high operating cash flows – Re-iterate our ACCUMULATE rating with a target price of Rs 1100/share

Results beat expectations

Jubilant Foodworks reported results ahead of our estimates with revenues posting a growth of 49.2% yoy to Rs 2.8bn in Q3FY12, largely led by healthy 30% yoy same store sales growth (SSG). EBIDTA grew by 62.4% yoy to Rs 524mn, while operating margins expanded 150bps yoy to 18.9% in Q3FY12 despite no change in gross margins (74.6% in Q3FY12), mainly on account of operational efficiencies. PAT (before extraordinary) posted 60% yoy growth to Rs 303mn. Including extra-ordinary cost of Rs 9mn (preoperative expenditure on Dunkin Donuts), RPAT grew 56% yoy to Rs 295mn.

SSG back to 30% mark; store addition also healthy

JFL posted 30% yoy same-store sales growth in Q3FY12, marginally above our expectations. JFL steered back to the 30% SSG growth range after a blip to 27% reported in Q2FY12. Out of this, order size growth was about 23-24%, while a 5% price hike led to transaction size growth of 5-6%. Despite high base effect of last year and expectation of growth moderation in discretionary products, SSG growth continued to remain strong. Our SSG assumption stays intact at 30% for FY12E and 20% for FY13E. JFL added 28 stores in Q3FY12 (highest in last 12 quarters) to take its total tally to 439 at end of Q3FY12, while city coverage increased from 87 in Q3FY11 to 100 in Q3FY12. Owing to the healthy store addition this quarter, JFL upped its new store target to 85 for FY12E.

Dunkin Donut's launch on track, Roll-out in Q4FY12

Similar to last quarter, JFL incurred pre-operative expenditure of Rs9 mn on Dunkin Donuts, classified as exceptional expenditure in the quarter. It is advanced stages of developing a strong backend before introducing the brand. The company stated that it is all set to launch its first Dunkin Donut's outlet in Q4FY12. This brand would initially focus on metros, with a phased target of 80-100 stores over next 5 years.

Sri Lankan operations building strength

The new store launched in Sri Lanka has been growing at a healthy pace. On the store addition front, JFL would be adding another store in Sri Lanka in Q4FY12, while it has also signed up for its 3rd and 4th store, which is likely to be operational by FY13E.

Maintain ACCUMULATE with target price of Rs 1100/share

JFL continues to progress on expansion of Dominos franchisee and introduce Dunkin Donut's franchisee. We continue to maintain our positive bias, considering the robust business model and strong growth potential of QSR segment in India. Further, we expect JFL to continue its robust earnings growth momentum for next 5-7 years – capitalizing the untapped market potential. We maintain our ACCUMULATE rating on the stock with a target price of Rs 1100/share, rolling valuations on FY14E earnings.

Source : Equity Bulls

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