Jubilant Foodworks (SELL): SSG and EBITDA margins weaken further - Ambit

Jubilant Foods' 1QFY14 results were below our forecasts by 2% for revenues and 9% for earnings. Same-store sales growth (SSG) was only 6.3% and EPS growth was only 5% YoY. This weakness was due to: (a) cannibalisation of sales growth due to store splits; (b) weak macro environment around moderating discretionary spends; and (c) double-digit growth for cost per store. Guidance for the full year remains unchanged at 8-10% for SSG and 16.5% for EBITDA margins. Our analysis suggests that Domino's has a maximum store count potential of ~950 stores, which is likely to rise to ~1,940 in 2023. Whilst SSG is likely to rise to 14% in FY15, a re-rating will be constrained by store splits, rising A&P spends (with rising competitive intensity) and expansion of Dunkin Donuts. We remain SELLers with a target price of Rs856/share. We expect 2-3% downgrade to our FY14 earnings.

Source : Equity Bulls

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