Jubilant FoodWorks: CLSA cuts target price after Q2 results; stock tanks 5%

CLSA has maintained its 'Outperform' rating on Jubilant FoodWorks Ltd but lowered its target price to Rs 550 from Rs 554 earlier following the company's September quarter results. The brokerage said India business indicators were improving, with resilient margins and Ebitda beating consensus estimates.

The brokerage said Jubilant FoodWorks reported 11.5% standalone sales growth in the second quarter of FY27, while like-for-like (LFL) growth at Domino's India stood at 4.1%. Ebitda increased 12.4% year-on-year (YoY), with the margin expanding 16 basis points to 19.8%. The operating performance was broadly in line with expectations, while Ebitda exceeded consensus estimates by 39 basis points.

Jubilant FoodWorks shares closed 5% lower at Rs 428.90 on Monday, compared with their previous close of Rs 451.30. The stock opened at Rs 452.55 and touched a high of Rs 454 during the session.

Domino's India growth momentum improves

CLSA said Domino's India revenue grew 9.2% YoY, supported by 6.3% growth in order volumes. LFL growth improved to 4.1% in Q2 FY27 from 2.5% in the June quarter. Delivery revenue increased 11.3% YoY, while dine-in and takeaway revenue grew 2.4%.

The brokerage noted that management retained its FY27 LFL growth guidance of 5-7%, indicating an expected acceleration in the second half of the financial year. New product launches and improvements in the attachment of beverages and desserts are also supporting ticket sizes. The company has rolled out its My Meal offering nationally at Rs 119.

Margins remain resilient despite cost pressures

CLSA highlighted an improvement in gross margin, which expanded 110 basis points YoY to 75.5%, despite inflationary pressures of around 200 basis points from LPG, minimum wages and raw materials, including rising cheese and oil prices.

Ebitda margin improved 16 basis points YoY to 19.8%. The brokerage attributed the company's ability to manage cost inflation to sourcing efficiencies, calibrated pricing, a better product mix, targeted discounts, lower wastage and technology-led cost savings.

Why CLSA cut the target price

Despite the improvement in operating performance, CLSA reduced its target price by Rs 4 to Rs 550 from Rs 554. The brokerage attributed the revision to higher depreciation and finance costs and cut its FY27 calendar-year earnings per share (EPS) estimate by 3%.

CLSA maintained its 'Outperform' rating, indicating that it continues to see potential in the stock despite the modest reduction in its valuation target.