Jubilant FoodWorks, the master franchisee for Domino’s Pizza in India, recently held an analyst meeting where discussions centred on macroeconomic headwinds and debt concerns stemming from the broader Jubilant Bhartia Group.
The group’s recent acquisition of Hindustan Coca-Cola Beverages (HCCB), Coca-Cola’s India bottling partner, has raised alarms among analysts regarding financial strain. However, Jefferies has clarified that these concerns are at the group level and do not directly impact the listed Jubilant FoodWorks entity.
Jefferies’ bullish stance is primarily based on its independent analysis, which suggests that concerns around a consumption slowdown are overstated. The brokerage’s channel checks indicate that Jubilant FoodWorks has implemented strategic measures to sustain growth.The company’s third-quarter like-for-like sales growth of double digits was not a one-off event, and Jefferies expects this momentum to continue in the coming quarters.
On the profitability front, Jubilant FoodWorks’ management has guided a 200 basis points (bps) margin expansion on a consolidated basis. However, Jefferies believes that the standalone margin improvement could be even higher, potentially reaching 250 bps in FY25.
Jefferies also notes that as the company continues its growth trajectory, profitability will naturally follow. The firm views Jubilant FoodWorks’ expansion plans favourably and believes that the company’s financial performance will improve as a result.
One of the key concerns raised by analysts has been the group-level debt following the HCCB acquisition. Jefferies acknowledges that the debt associated with this acquisition is approximately ₹5,500 crore. However, they highlight that the combined market capitalisation of all listed Jubilant entities, including Jubilant FoodWorks, stands at around ₹36,000 crore. This provides an 8x cover against the debt, which Jefferies sees as a manageable risk rather than a red flag.
Despite the stock delivering negative returns of around 10% over the past six months, Jefferies remains confident in its long-term growth potential.
