Jubilant Foodworks Ltd - Result Update - GEPL Capital

Q4FY12 - Great growth story but seems slightly overcooked

Jubilant Foodworks Ltd. (JFL) reported net sales growth of 46.1% Y-o-Y to Rs.2.83 bn driven by a) 26 store additions, b) 5% average price hike in Nov11, and c) 26.2% same store sales (SSS) growth in the quarter.

Result Highlights

Revenues grew 46.1% Y-o-Y on strong store additions

The company added 26 stores in the quarter beating the full year guidance of 80 stores as it added 85 stores in FY12. The SSS growth at 26.2% in Q4FY12 on an already high base of 33.2% in Q4FY11 was in-line with our estimates and the full year SSS growth stood at 29.6% vs 37.2% in FY11. The management has revised its store addition guidance upwards to 90 stores in FY13E.

Raw material pressures ease while other expenses rose

The raw material cost as a percentage of sales reduced by 10bps Y-o-Y and 100bps Q-o-Q to 25.4% in Q3FY12. The series of innovative additions in the menu, price mix and a strong sales growth in the quarter helped negate the high milk prices seen during the last 9 months. Other expenses reduced by 60bps Y-o-Y and 100bps Q-o-Q to Rs.814 mn. Rental cost however rose to 8% as a percentage of sales in Q4FY12 while it stood at 7.7% in Q4FY11 and 7.1% in Q3FY12. Though the operating profits grew by 140bps Y-o-Y to 18.5% in Q4FY12, it declined 40bps on a sequential basis led by higher rentals and staff cost in the quarter. (19.4% in Q4FY12 vs 18.8% in Q3FY12)

PAT grew 51.8% Y-oY but declined sequentially

While the higher EBITDA margins resulted in a 58.9% Y-o-Y growth in EBITDA to Rs.525 mn (flat sequentially), the profit growth was marginally lower at 51.8% Y-o-Y growth and decline of 0.5% sequentially standing at Rs.293 mn. The profit gains were marginally lower due to the higher tax rates seen in the quarter which stood at 29.9% as compared to 24.7% in the same period last year.

Valuation & viewpoint

We increase our target price on the stock to Rs.885 per share in view of the management revising its store additions in FY13E to 90 from the earlier 85. The new store addition guidance should result in a higher than estimated EPS.

However, the valuations appear rich given a) the recent run up in the stock over the last six months, b) lower SSS growth expectations in the future, c) lower average sales per store, and d) lower scope of margin improvement. Consequently we revise our rating to SELL with a target price of Rs.885 per share.

Source : Equity Bulls

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