Is every QSR player in India seeking to Jubilant Foodworks model? Brokerage decodes – explains growth opportunity in sector
Players like Sapphire Foods (one of the two Yum Brands franchisees in India) and Westlife Development (operates McDonalds stores in South & West India) have reworked their model and strengthened their balance sheets.
Expecting a faster growth in the Indian consumption space, JM Financial believes that QSR (Quick Service Restaurants) store counts in the country could treble over a 10-year period, which convinces the brokerage that QSR growth outperformance will continue in the future as well.
QSRs benefit from category under-penetration and favourable demographic factors that could drive eat-out / order-in frequencies significantly over time, the domestic brokerage firm believes.
“Players like Sapphire Foods (one of the two Yum Brands franchisees in India) and Westlife Development (operates McDonalds stores in South & West India) have reworked their model and strengthened their balance sheets, are now well-positioned to capitalise on emerging opportunities.”
Both these stocks also currently trade at a significant discount against peers, which makes them attractive relative picks in the space, it said.
What Jubilant Foodworks’ Domino’s model has achieved is perhaps what every QSR player in the country would seek to replicate, JM Financial estimate.
Size of the opportunity apart, the execution excellence that it has demonstrated over a long period of time is likely what earned it its premium trading multiple, in the brokerage’s view.
JM Financial added, “What made Jubilant the first-among-equals is its steadfast focus on the aspects that mattered to its consumers in the country, viz., value-for-money proposition (through its Everyday Value offers), an omnichannel approach that leveraged technology well to enhance consumers’ overall experience; for itself, it ensured that its unit economics are sound and sustainable.”
The latter is important since there is a need to generate sufficient cash to be able to expand to take advantage of the ‘very large opportunity that the sector promises, according to the brokerage.
While both Sapphire and Westlife have strong brands in their respective folds - KFC, Pizza Hut (PH), McDonald's - there were some challenges in getting the proposition and unit metrics perfected, which eventually impacted their scalability of their business models, it pointed out.
Over the past few years, both these players have taken corrective measures - rightsizing cost structures (and of stores as well for Sapphire), strengthening omnichannel capabilities, and reshaping the value proposition (Pizza Hut) to address these issues, the brokerage stated.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Senior Citizen Latest FD Rates: Know what major banks like SBI, PNB, Canara Bank, HDFC Bank, ICICI Bank are providing on fixed deposits
Gratuity Calculator: Rs 38,000 as last-drawn basic salary, 5 years and 5 months of service; what will be gratuity amount?
EPFO Pension Schemes: Early pension, retirement pension, nominee pension and 4 other pension schemes that every private sector employee should know
Top 5 Small Cap Mutual Funds with best SIP returns in 1 year: See how Rs 25,000 monthly investment has grown in each scheme
Top 7 SBI Mutual Funds With Best SIP Returns in 1 Year: Rs 25,000 monthly SIP investment in No.1 fund has jumped to Rs 3,58,404
05:38 PM IST