The firm, which runs various meals chains in India, acquired the grasp franchise rights for Popeyes — the world’s second-largest fast service chicken restaurant after KFC — in India, Bangladesh, Nepal and Bhutan.
“Popeyes can substantially increase the addressable market size for Jubilant. The chain QSR chicken market size is estimated at more than Rs 3,000 crore, in which KFC is a major player with Rs 2,000 crore in revenues. Recently, Westlife Development has also entered this space in South India,” mentioned Ashit Desai and Devanshu Bansal of Emkay Global.
They, nevertheless, mentioned Popeyes is smaller and lesser recognized exterior the US, and Jubilant would want to speculate strongly to ascertain the model and scale up the franchise in India.
Emkay Global maintains a ‘buy’ score on the inventory with a value goal of Rs 2,750. The inventory traded 1.50 per cent greater at Rs 2,918 on Tuesday morning.
The firm mentioned Popeyes, together with 4 different manufacturers that it manages – Domino’s, Dunkin’ Donuts, Hong’s Kitchen and Ekdum – would supply the agency price synergies and better bargaining energy for leases and retailer areas at meals courts.
CLSA additionally welcomed the deal. It maintained an ‘outperform’ score on the inventory with a goal value of Rs 3,000, saying that the corporate is fast to handle alternatives and is strategically reshaping the enterprise.
One ought to remember the fact that Covid severely impacted the revenues of QSR chains, together with those who Jubilant FoodWorks manages. However, there was a restoration in current months. With a resurgence in Covid circumstances, it must be seen how these chains cope up with the brand new realities.
Nihal Mahesh Jham of Edelweiss mentioned the important thing elements to evaluating Popeyes’ potential and worth would for Jubilant will probably be: one, monitoring any restaurant opening targets, just like Burger King India; two, royalty fee and retailer economics for the model; three, menu localisation and extension plans.
“Led by Domino’s store expansion potential (195 stores over FY20–23) and its strong expected same store growth of 6 per cent average in FY20:23 and past growth of 10 per cent during FY17–20, we estimate Jubilant to clock 11 per cent CAGR in revenue and 15 per cent in Ebitda over FY20–23,” mentioned Jham.
Edelweiss mentioned the inventory stays its prime decide within the QSR area and maintained a ‘buy’ score with a value goal of Rs 3,575 at 40 occasions anticipated June 2022 EV/Ebitda.
Some different commentators mentioned lack of success in new codecs and types may be margin-dilutive and poses a danger to the inventory.