Jubilant FoodWorks plunges over 5% post weak Q2 show: Should investors buy, sell or hold the QSR stock?

Shares of the QSR firm Jubilant Foodworks in Thursday’s (October 26) session fell as much as 5.46 per cent, hitting the day’s low of Rs 504.6 apiece on the BSE. The losses in the scrip were triggered after the operator of Domino’s Pizza and Dunkin’ Donuts posted weak set of numbers for the July-September period.

Consolidated net profit at the food services company during the period under review fell 26.1 per cent on a year on year (YoY) basis to Rs 97.2 crore according to a regulatory filing.

The standalone revenue from operations, however, increased 4.5 per cent to Rs 1,344.8 crore. The growth was driven by Domino’s Delivery channel sales which increased by 7.9 per cent. The Average Daily Sales of mature stores, came in at Rs. 81,658, up 1.4 per cent sequentially. 

Gross margin during the Q2 period is reported at 76.4 per cent. EBITA and EBITDA margin for the period stood at Rs 280.7 crore and 20.9 per cent, respectively.

At the time of publishing this report, the stock was down around 5 per cent lower at Rs 502.2.

What brokerages make of Jubilant FoodWorks after the QSR company's earnings announcement

Global brokerages have a mixed outlook on the stock:

Global brokerage Morgan Stanley maintains an equal weight rating on the stock with a slashed new target price of Rs 493. The brokerage notes that the food services major reported weak Q2 performance on the back of subdued topline growth. Sequential improvement in operating metrics & gross margins were positives but overall growth remains slow, added the brokerage. EEBITDA margin was down 340bps YoY & 20bps QoQ to 20.9% (vs MSe 21%) .Morgan Stanley has slashed its FY24-26 estimates by 9-12 per cent.

Goldman Sachs is neutral on the counter and has raised the target price from the earlier Rs 490 to Rs 515. The brokerage iterates the owner of Domino’s Pizza franchises posted a soft September quarter with the demand likely bottoming out. Further, it said that the revenue came in line with the estimates, nonetheless profit before tax continued to decline on the back of robust store addition. Goldman Sachs sees recovery in the pizza segment to be delayed.

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