Jubilant FoodWorks share price: Elara Securities put Accumulate rating with price target of Rs 3000

Jubilant FoodWorks has entered the Burger segment - Advantage of being a large scale QSR company with end to end offerings. Jubilant FoodWorks continues to expand into new business offerings, after Biryani and Chinese. Burger as a segment has witnessed healthy growth in India vs pizza, however the kind of product offering isn’t delivery friendly as compared to pizza/Biryani. Jubilant Food share price today is Rs 2905, up Rs 35 or 1.25%.

Elara Securities await more details on the strategy for Popeye expansion in India, however:

1) lower store size vs McDonalds
2) better product recall/marketing
3) traction for non-Veg food
4) reasonable ticket size (Rs 500- Rs 550)
5) scale on food delivery will be key monitorable for success in medium term

See Zee Business Live TV Streaming Below:

Over and above all these factors, Jubilant FoodWorks has a huge advantage vs peers due or a better know how of their customer base and consumption trends as they deliver themselves rather than relying on aggregator delivery. There are only 3-4 large global chains in the India QSR space for burger/sandwich (Burger King, McDonalds, Subway, KFC) while the growth potential in the QSR chain market (22% CAGR over next five years) is huge and does have scope for addition of few more global chains who can scale up.

Elara Securities believes some kind of success on scale of these new businesses in the medium to long term will lead to re-rating of the valuation multiples as JUBI takes advantage of the high growth India QSR market. Elara Securities have an Accumulate rating on Jubilant FoodWorks with a target price of Rs 3000 based on 27.5x one year fwd EV/EBITDA.

F&B Industry in India is Rs 4096 bn as per Technopak Report, 2019, amongst which the Organized market (comprising QSR) is expected to witness a strong CAGR of 31% over FY19-24P (ex-COVID-19 impact). Organized QSR Segment in India is expected to witness the fastest growth amongst the organized segment v/s other formats like Casual Dining, Fine Dining, Cafe’s growing at CAGR of 19% over FY19-24P (ex-COVID-19 impact) led by rising presence of international brands, strengthening of back-end infrastructure, acceptance of new cuisine, changing lifestyles, aspirations. Also, the Burgers and sandwiches have witnessed a CAGR of 20%, pizza at 14% and chicken at 13% over FY14-19 indicating a huge scope for scalability & growth within the segment.

Popeye operates at a reasonable scale vs peers globally:

Popeyes has more than 45 years of history and culinary tradition. Popeyes distinguishes itself with a unique New Orleans style menu featuring the iconic chicken sandwich, spicy chicken, chicken tenders, fried shrimp, and other regional items. Popeye’s flavourful authentic food menu has allowed the brand to become one of the world's largest chicken QSR with over 3400 restaurants in over 25 countries around the world.

Amongst the large peer Global QSR Chains(other than Pizzas), McDonalds has highest no. of outlets at 13,846 stores, followed by Burger King at 7346 stores, Taco Bell at 7089 stores, Wendy’s at 5852 stores and KFC has 4096 outlets as on CY19. Also in terms of the geographical presence, KFC, Pizza Hut & Tacobell are present in 139 countries, followed by Subway in 112 countries & others ranging between 90-100 countries.

Popeye has been the nearest competitor to burger brands like McDonalds, Burger King & Non-Veg Fried Chicken brands like KFC which have done phenomenally well in India given the strong traction for non-veg within the youth of India. Gross margins within the Burger/fried chicken market have been in the range of 65-68% which are lower as compared to the Pizza’s 75-78% margins.