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Quick service restaurants major Jubilant FoodWorks reported 623 m net profit for the April-June quarter. The firm had posted 726 m net loss in the same quarter last year.

The company’s performance came in the face of a second wave of the Covid-19 pandemic, which impacted its store openings across the country.

The operator of the country’s largest restaurants chain under the Dominos brand, Jubilant’s operating revenue grew 131% to 8.8 bn from 3.8 bn in June 2020 quarter.

The company said the growth was driven by like-for-like sales growth (at 120%) and same-store growth of 114% in Domino’s Pizza.

It also said the growth in deliveries witnessed during the second wave of the pandemic helped it offset the decline in dine-in.

Jubilant FoodWorks delivery channel during the quarter grew by 124%.

Its earnings before interest, taxes, depreciation, and amortisation (EBITDA) for the quarter stood at 2.1 bn and its EBITDA margin was 24%.

Expansion to resume

Jubilant FoodWorks added 29 stores last quarter – 20 new outlets for Domino’s Pizza, and three stores each for its other brands Dunkin Donuts, Ekdum!, and Hong’s Kitchen.

It opened stores in five new cities during the quarter.

The lockdowns and the restrictions due to the pandemic presented a lot of on-ground challenges and they interrupted our store expansion momentum, leading to a lower number of new stores,’ informed co-chairman of Jubilant FoodWorks, Hari Bhartia.

The company now plans to accelerate its store expansion and plans to open about 150-175 stores in the financial year 2022. The majority of these would be Domino’s Pizza.

‘Domino’s Pizza will continue to power ahead and we see a clear potential of 3,000 stores in India in the medium to long term for the brand,’ said Pratik Pota, CEO, and whole-time director, Jubilant FoodWorks, during the investor call.

According to the company, it will open a mix of formats during the year, some of which would be shared stores between its three brands – Dunkin Donuts, Ekdum!, and Hong’s Kitchen – focused on deliveries, while others would be standalone stores for all its brands, including Domino’s Pizza.

Company’s recovery on track

Jubilant FoodWorks reported an almost 94% recovery in the first quarter of the financial year 2022 when compared to the pre-pandemic period of the quarter one of 2020.

The company had reported a net profit of 714.8 m in the first quarter of 2020 and its revenue from operations during the period stood at 9.5 bn.

During a post-earnings call, Hari Bhartia, Co-chairman of Jubilant FoodWorks said,

"As the covid caseloads increased, we were faced with multiple restrictions. Dining operations were largely shut across the country.

Mobility restrictions severely impacted our takeaway channel. State-specific delivery restrictions increased the on-ground challenges further."

However, he added, despite the reduction in operating hours and operational stores on dining, sales recovery in Domino’s was led by strong growth in the delivery channel.

According to Bhartia, the easing of restrictions going ahead will result in sequential improvement in the company’s operating performance.

E-commerce domination will drive sales growth

The segment’s quick adoption of e-commerce and delivery-led models made them less susceptible to the second wave even as stores were shut due to the lockdowns.

The pandemic has accelerated the push towards digitisation and the early movers, which continue to invest in their digital capabilities will benefit in the long-term.

Quick service restaurants show strong appetite for growth

The quick service restaurants (QSRs) have gained a major market share in a short period. They were the first off the blocks last year when the restrictions were lifted.

Most likely, the trend will repeat itself this year as well once the covid-19 wave subsides.

According to a leading financial daily, QSRs are in a sweet spot for rapid growth over the next 5 to 10 years in India and offer scope for a 25 – 30% operating profit CAGR (compound annual growth rate) for several players, with Domino’s as the most efficient among them.

How the stock markets reacted to Jubilant FoodWorks

Shares of Jubilant FoodWorks opened the day at 3,215 on the BSE and 3,207 on the NSE.

Its share price closed at 3,435.6 (up 12.2%) on the BSE and 3,430 (up 11.9%) on the NSE.

At its current price, it is trading at a P/E of 120.9.

The share touched its 52-week high of 3,447.6 and 52-week low of 1,656.4 on 22 July 2021 and 27 July 2020, respectively.

Over the last 30 days, the Jubilant FoodWorks share price is up 3.1%. Over the last one year, the company’s share price is up 91.2%.

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About Jubilant FoodWorks

Jubilant FoodWorks was incorporated on 16 March 1995 as Domino's Pizza India Private Limited and began operations in 1996.

It changed its name to Jubilant FoodWorks in 2009. The company opened India's first Domino's Pizza outlet in New Delhi in 1996.

The company is a part of the Jubilant Bhartia Group, owned by Shyam Sunder Bhartia.

It has two strong international brands in its portfolio Domino's Pizza and Dunkin' Donuts addressing different food market segments.

The Indian food service company has the exclusive rights to develop and operate Domino's Pizza brand in India, Sri Lanka, Bangladesh, and Nepal.

It also has exclusive rights for developing and operating Dunkin' Donuts restaurants for India.

For more details about the company, you can have a look at Jubilant FoodWorks factsheet and Jubilant FoodWorks quarterly results on our website.

This article is syndicated from Equitymaster.com

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