Jubilant’s management believes that QSR demand in the country will increase rapidly given the possibility of closure of 30-35% of conventional restaurants. This has prompted the company to raise the store addition target for FY22 to 150-175 from earlier 135 since it expects improved demand for larger, trusted brands. It also said that the domestic market has a capacity to absorb 3,000 Domino’s outlets compared with the earlier estimate of 1800-2000 outlets — it currently operates 1,380 outlets.
In the first quarter of FY22, it added 29 stores. Of that, 20 were Domino’s while the remaining were Dunkin Donuts, Ekdum Biryani and Hong Kitchen. A greater focus on delivery in the case of new stores will reduce the extent of initial investment. The company has increased manpower in data science and artificial intelligence to become a foodtech giant.
In the June quarter, the company’s revenue more than doubled on a lower year-ago base. The operating profit before interest, depreciation, and amortisation (EBITDA) jumped to Rs 210 crore from Rs 24.1 a year ago. The EBIDTA margin expanded to 24% from 6% in the year-ago quarter. It was also higher than the analysts’ estimate of 21%. In the near term, the management does not expect rental cost increase given the supply glut amid the pandemic.
Analysts expect the company to deliver 55-60% earnings growth for the next two years.
Its stock trades at 60 times estimated FY23 earnings. Given its superior business model, the management has been able to deliver more than 20% return on capital consistently for the past several years except in FY21. With a cash balance of nearly Rs 600 crore, the company looks well in position to take advantage of future opportunities.