Domino's Pizza in growth mode

A conservative approach towards opening of new stores, maximising value out of the existing stores and weeding away the non-performing stores has brought back Jubilant Foodworks, the company which owns Domino's Pizza and Dunkin' Donuts in India, on the growth trajectory.

After registering a 7.5 per cent year-on-year dip in same store sales growth (SSSG) the company in the fourth quarter of FY18 has registered a 27.5 per cent SSSG. The company's revenue saw a 17.1 per cent growth in FY17-18,  from Rs 2546.07 crore to Rs 2980.44 crore. The profit jumped by 206.9 per cent, from Rs 67.5 crore to Rs 206.4 crore.

Apart from rationalising its stores, the company tried to maximise its existing store growth through schemes such as Everyday Value Offer, wherein a consumer could buy a medium pizza at Rs 199 (originally priced at Rs 295) if she bought two pizzas at a time, wherein the idea was to make pizzas a regular consumption option.

The company also considerably stepped up its online presence, as a result of which its online ordering contribution to overall sales increased from 51 per cent in Q4 FY17 to Q4 FY 18.

The company has also reduced losses in Dunkin' Donuts by focusing more sharply on its global focus on donuts and coffee. Dunkin's focus in India earlier was more a fast food chain, where products such as burgers was given more importance than donuts, and this didn't work. The company claims the Dunkin' Donuts will be profitable by 2019.

Though Jubilant Foodworks has certainly sprung a surprise by registering a robust growth, the likes of Edelweiss Securities give it a 'Hold' rating.

"We estimate 12.1 per cent YoY SSSG coupled with 354bps EBITDA margin expansion in FY19, led by JFL's focus on value offerings, menu innovation and ongoing cost rationalisation. In light of the positive surprise, we raise our target multiple to 40x (earlier 36x) to arrive at a revised TP of INR2,766 (earlier INR2,399). We, however, maintain 'HOLD/SP' owing to limited upside from current levels," points out a recent Edelweiss Securities report.