Jubilant FoodWorks (JUBI IN) Rating: ACCUMULATE | CMP: Rs3,176 | TP: Rs3,370 June 15, 2021 Dominos powers growth and new ventures Q4FY21 Result Update Quick Pointers: ☑ Change in Estimates | ☑ Target | Reco . Opened 50 Domino’s stores and 1 store each of Dunkin Donuts (4 closed), Hongs Kitchen and Ekdum! Change in Estimates Current Previous . Recovery on track as Overall sales grew 14.3% driven by 28.7/76.9% growth FY22E FY23E FY22E FY23E Rating ACCUMULATE ACCUMULATE in Delivery/Takeaway. Target Price 3,370 3,279 Sales (Rs. m) 44,292 53,188 42,978 51,206 . Recovery at 94.4% /87.7 in April’21/May’21 even during peak of wave 2. % Chng. 3.1 3.9 EBITDA (Rs. m) 11,871 14,842 12,031 14,409 % Chng. (1.3) 3.0 We are decreasing our FY22/23 EPS by 6.3/0.7% due to 1) Lower EBITDA EPS (Rs.) 36.5 50.5 38.9 50.9 % Chng. (6.3) (0.7) margins in FY22 on account of lower than expected margins in FY21 and 2) Increased Ad spends to promote Popeyes. We remain postive on JUBI given Key Financials - Standalone 1) Increased focus on store opening in coming years with medium term Y/e Mar FY20 FY21 FY22E FY23E potential of 3000 Dominos 2) lower competition given covid led shakeout 3) Sales (Rs. m) 38,858 32,689 44,292 53,188 Investment in App being rewarded by record downloads and improved mix/ EBITDA (Rs. m) 8,771 7,666 11,871 14,842 order value 4) Ability to capitalize on increasing convenience sales given Margin (%) 22.6 23.5 26.8 27.9 PAT (Rs. m) 3,203 2,337 4,814 6,664 strong digital/delivery network. EPS (Rs.) 24.3 17.7 36.5 50.5 Gr. (%) (3.2) (27.0) 106.0 38.4 We believe JUBI is in the process of emerging as a multi cuisine multi brand DPS (Rs.) 6.0 6.0 12.0 16.0 Yield (%) 0.2 0.2 0.4 0.5 play with entry into biryani (EkDum), chinese foods (Hongs Kitchen) and RoE (%) 25.6 17.4 29.9 33.7 chicken segment (Popeyes). We believe JUBI will have to undertake RoCE (%) 42.5 29.8 46.8 50.5 significant investments over the years to make Popeyes a success, more so EV/Sales (x) 10.6 12.6 9.3 7.6 EV/EBITDA (x) 47.0 53.9 34.6 27.3 given the brand positioning of KFC. We believe Popeyes has better chances PE (x) 130.9 179.3 87.1 62.9 of success than Dunkin Donuts, which we don’t rule out as an exit from JUBI P/BV (x) 35.4 28.0 24.3 18.8 over next couple of years. We remain positive given strong growth and positioninig and growth in core Dominos business. We value the stock on Key Data JUBI.BO | JUBI IN DCF and assign a target price of Rs3370 with Accumulate rating. 52-W High / Low Rs.3,252 / Rs.1,596 Sensex / Nifty 52,773 / 15,869 Market Cap Rs.419bn/ $ 5,717m Concall Takeaways: 1) Store expansion in FY22 will be similar to FY21 levels (134 Shares Outstanding 132m 3M Avg. Daily Value Rs.3583.36m stores) 2) See store expansion opportunity in same towns, by entering new towns and by entering new channels 3) No price hike taken in the last 3 years, may do Shareholding Pattern (%) so only if required in the future 4) Increase in EBITDA margins due to aggressive Promoter’s 42.11 expansion in network and prudent cost cutting measures 5) Smaller towns have Foreign 40.87 shown higher growth than Tier 1 towns in delivery channel 6) No plans to increase Domestic Institution 11.36 Public & Others 5.66 stake in DP Eurasia in near future 7) Domino, Popeye, Ekdum etc. will have Promoter Pledge (Rs bn) 3.81 individual apps as each of them have different customer footprints 8) Retained most attractive offers on own app 9) Higher frequency, ticket size and LTV customers Stock Performance (%) seen on own app 10) Dine in revenues are expected to come back as lockdown 1M 6M 12M Absolute 13.2 23.0 87.1 restrictions get lifted 11) Chicken is a Rs40bn market with strong delivery bias Relative 4.5 7.8 17.8 playing to JUBI’s strength. Amnish Aggarwal SSG grew 11.8%: Net Sales increased 14.3% to Rs 10.26bn (Est Rs 9.95bn). SSG [email protected] | 91-22-66322233 growth at 11.8% and Like-for-like (LFL) Sales growth 15.1%.Gross margin Charmi Mehta expanded 300bps YoY to 77.5% (Est 77.1%). EBIDTA increased 47% to Rs 2.49bn [email protected] | 91-22-66322256 (est Rs 2.69bn). EBITDA margins expanded 540bps to 24.3% (Est 27%) mainly on Heet Vora account of gross margin expansion. Adj PAT increased 95.5% to Rs 1.04bn (Est [email protected] | 91-22-66322381 Rs 1.07bn). June 15, 2021 1 Jubilant FoodWorks 4QFY21 Sales grew 14.3%, Margins aided by GRM expansion Y/e March Q4FY21 Q4FY20 YoY gr. (%) Q3FY21 FY21 FY20 YoY gr. (%) Net Sales 10,259 8,979 14.3 10,572 32,689 38,858 (15.9) Gross Profit 7,947 6,682 18.9 8,278 25,539 29,151 (12.4) % of NS 77.5 74.4 3.0 78.3 78.1 75.0 3.1 EBITDA 2,492 1,695 47.0 2,786 7,666 8,771 (12.6) Margins % 24.3 18.9 5.4 26.4 23.5 22.6 0.9 Depreciation 858 916 (6.3) 876 3,672 3,441 6.7 Interest 370 410 (9.6) 405 1,606 1,635 (1.7) Other Income 110 204 (46.2) 156 704 688 2.2 PBT 1,373 573 139.8 1,661 3,091 4,383 (29.5) Tax 330 39 738.9 410 754 1,181 (36.1) Tax rate % 24.0 6.9 17.2 24.7 24.4 26.9 (2.5) Adjusted PAT 1,043 533 95.5 1,251 2,337 3,203 (27.0) Source: Company, PL Closed 3 stores (net) during the quarter Dominos opened 50 stores during 4Q Dunkin Donut Stores Stores Cities 40 37 34 32 32 32 35 31 30 30 30 1600 1360 27 1354 1335 1325 30 26 1314 1283 1264 1249 1227 24 1200 1400 1167 1144 25 1200 1134 20 1000 15 800 600 293 288 285 282 282 281 276 10 276 273 271 269 268 400 266 5 200 0 0 Q1FY19 Q2FY19 Q3FY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 Source: Company, PL Source: Company, PL SSG at 11.8%; LTL at 15.1% OLO contribution at 98% 40.0 Online sales Mobile (% of online) 26.5 25.9 20.5 30.0 17.8 14.6 App Download (m) 11.8 20.0 5.5 6.5 4.9 4.2 2.9 6.0 4.1 10.0 5.9 120 99 99 98 98 70 0.0 88.9 100 81 85 87 60 -10.0 1.7 75 - 3.2 73 50 - 68 3.3 3.4 (%) 80 63 65 - -20.0 - 7.5 - 40 -30.0 60 30 -40.0 20.0 -50.0 - 40 20 -60.0 20 10 -70.0 0 0 61.4 - 4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 2QFY19 3QFY19 4QFY19 1QFY20 2QFY20 3QFY20 4QFY20 1QFY21 2QFY21 3QFY21 4QFY21 Q4FY18 Q1FY19 Q2FY19 Q3FY19 4QFY19 1QFY20 2QFY20 3QFY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Source: Company, PL Source: Company, PL June 15, 2021 2 Jubilant FoodWorks System Sales Recovery during Q4FY21 Source: PL, Company Like for Like (LFL) Sales recovery during Q4FY21 Source: Company, PL Announced Master Franchise Agreement with Popeyes. Source: Company, PL June 15, 2021 3 Jubilant FoodWorks Financials Income Statement (Rs m) Balance Sheet Abstract (Rs m) Y/e Mar FY20 FY21 FY22E FY23E Y/e Mar FY20 FY21 FY22E FY23E Net Revenues 38,858 32,689 44,292 53,188 Non-Current Assets YoY gr. (%) 10.1 (15.9) 35.5 20.1 Cost of Goods Sold 9,707 7,150 9,976 12,017 Gross Block 18,110 20,108 23,981 28,312 Gross Profit 29,151 25,540 34,316 41,171 Tangibles 17,023 18,865 22,557 26,681 Margin (%) 75.0 78.1 77.5 77.4 Intangibles 1,088 1,243 1,424 1,631 Employee Cost 7,846 7,357 8,628 9,652 Other Expenses 12,534 5,292 6,838 8,002 Acc: Dep / Amortization 9,771 11,575 13,910 16,665 Tangibles 9,050 10,686 12,829 15,364 EBITDA 8,771 7,666 11,871 14,842 Intangibles 721 889 1,081 1,301 YoY gr. (%) 44.3 (12.6) 54.9 25.0 Margin (%) 22.6 23.5 26.8 27.9 Net fixed assets 8,340 8,533 10,070 11,646 Tangibles 7,973 8,179 9,727 11,317 Depreciation and Amortization 3,441 3,672 4,332 4,865 Intangibles 367 354 343 330 EBIT 5,329 3,994 7,539 9,977 Capital Work In Progress 394 267 200 200 Margin (%) 13.7 12.2 17.0 18.8 Goodwill - - - - Non-Current Investments 1,888 6,400 7,288 8,306 Net Interest 1,635 1,606 1,717 1,855 Net Deferred tax assets 810 884 972 1,069 Other Income 688 704 698 905 Other Non-Current Assets 14,150 13,781 12,877 12,224 Profit Before Tax 3,935 3,091 6,520 9,026 Current Assets Margin (%) 10.1 9.5 14.7 17.0 Investments 512 815 2,071 2,647 Inventories 922 1,305 876 1,072 Total Tax 1,181 754 1,706 2,362 Trade receivables 193 179 388 466 Effective tax rate (%) 30.0 24.4 26.2 26.2 Cash & Bank Balance 6,392 5,175 6,396 10,715 Other Current Assets 369 653 443 532 Profit after tax 2,755 2,337 4,814 6,664 Total Assets 33,989 38,015 41,607 48,902 Minority interest - - - - Share Profit from Associate - - - - Equity Equity Share Capital 1,320 1,320 1,320 1,320 Adjusted PAT 3,203 2,337 4,814 6,664 Other Equity 10,510 13,652 15,914 20,995 YoY gr.