Jubilant FoodWorks Limited

Jubilant FoodWorks boasts a diverse portfolio of brands and in India alone it operates 1,995 stores across 421 cities, underscoring its dominance and rapid growth within the food service sector 

Jubilant FoodWorks Limited (JFL), part of the Jubilant Bhartia Group, stands as one of India’s largest and fastestgrowing food service companies. Incorporated in 1995 and commencing operations in 1996, JFL has established itself as a prominent player in the food service industry, particularly within the emerging markets. The company’s extensive network comprises 2,991 stores across six countries: India, Turkey, Bangladesh, Sri Lanka, Azerbaijan and Georgia. Over the past year, JFL has significantly expanded, adding 356 stores to its network.

JFL boasts a diverse portfolio of brands, holding franchise rights for three global brands—Domino’s, Popeyes and Dunkin’—and operating two proprietary brands: Hong’s Kitchen, an IndoChinese quick service restaurant (QSR) in India, and COFFY, a café brand in Turkey. In India alone, JFL operates 1,995 stores across 421 cities, underscoring its dominance and rapid growth within the food service sector. With a strong presence in the emerging markets and a strategic focus on expansion, JFL continues to leverage its brand portfolio to cater to diverse food market segments, reinforcing its position as a leading food service company.

Dominance in the Market
Jubilant FoodWorks demonstrates significant market dominance across multiple countries, underpinned by an extensive network of stores and strategic expansion plans. In India, Jubilant FoodWorks holds the top market position with 1,995 stores, showcasing its substantial reach and influence. Similarly, in Turkey, Jubilant FoodWorks maintains the top rank with 700 stores, underscoring its leadership in this market. Bangladesh also sees Jubilant FoodWorks in the leading position with 28 stores. In Sri Lanka, Jubilant FoodWorks is ranked second with 30 stores. Meanwhile, in Azerbaijan and Georgia, Jubilant FoodWorks is ranked third and second respectively, with 10 and seven stores, indicating growing influence in these regions.

The medium-term potential for expansion is promising. In India, Jubilant FoodWorks aims to grow its network to 4,000 stores, reinforcing its market leadership. In Turkey, it has in place a plan to expand to 1,200 stores, which will further solidify its top position. Bangladesh’s potential growth to 200 stores will continue to establish Jubilant FoodWorks’ dominance. In Sri Lanka, the target is to reach 100 stores, enhancing its market presence. Azerbaijan and Georgia also present growth opportunities, with expansion plans to reach 25 and 10 stores, respectively, thereby increasing market influence.

Financials FY24
In the fiscal year, Jubilant FoodWorks Limited (JFL) demonstrated robust financial performance. The company reported a 9.6 per cent increase in consolidated revenue, reaching ₹5,654 crore. Its gross profit for the year stood strong at ₹4,313 crore, maintaining a commendable gross profit margin of 76.3 per cent. However, despite these gains, the operating EBITDA margin saw a year-on-year decline from 22 per cent to 20 per cent. This reduction was attributed to operational deleverage and increased investments in brand development initiatives. The operating EBITDA amounted to ₹1,143 crore, underscoring JFL’s operational efficiency despite margin pressures. The company generated a profit after tax (PAT) of ₹400 crore, reflecting a PAT margin of 7.1 per cent.

Q4FY24
In the latest quarter, JFL has reported impressive financial results, with consolidated revenue soaring by 23.9 per cent yearon-year to ₹1,573 crore. The company’s robust operational management was evident as its operating EBITDA stood strong at ₹310 crore while achieving a PAT margin of 13.3 per cent and delivering a PAT of ₹208 crore. The Indian market played a pivotal role, contributing 84.65 per cent of the total revenue, while the remaining 15.35 per cent came from the international markets.

The company’s revenue from operations in India reached ₹1,331 crore, marking a 6.3 per cent growth driven by a 4.9 per cent increase in Domino’s India sales. Despite a challenging environment, Domino’s India achieved a slight 0.1 per cent like-for-like (LFL) sales growth, with Domino’s Delivery LFL sales notably rising by 7.8 per cent. The introduction of new brands contributed 1.4 per cent to the overall growth, showcasing JFL’s successful diversification efforts within the domestic market.

Internationally, its revenue from operations totalled ₹243 crore, driven by contributions from Turkey, Azerbaijan and Georgia, which collectively accounted for ₹217 crore over the quarter. Domino’s Bangladesh reported revenue of ₹13 crore, marking a substantial 52.1 per cent increase attributed to expanded network presence and enhanced operational efficiencies. Similarly, Domino’s Sri Lanka recorded revenue of ₹12 crore, reflecting a 4.1 per cent growth. JFL expanded its global footprint by adding a total of 23 new stores across the international markets, reinforcing its market position and growth strategy abroad.

Growth Triggers
In Bangladesh, JFL expanded its footprint significantly, increasing its store count from 17 to 28 within a year. This expansion underscores the company’s commitment to tapping into Bangladesh’s burgeoning market potential.

■ In Turkey, JFL’s café brand, COFFY, has emerged as one of the fastest-growing and profitable café brands, currently ranking as the eighth-largest in the country. With ambitious targets, JFL aims to elevate COFFY to the fifth-largest café brand in Turkey by the end of 2024, leveraging its strong market presence and growth strategy.

■ The rapid expansion of Popeyes, a globally recognised QSR brand, continues with JFL’s entry into new cities. This expansion strategy aims to capitalise on Popeyes’ established brand equity and meet increasing consumer demand.

■ Furthermore, JFL is diversifying its portfolio through the introduction of new brands in categories such as chicken, coffee and Chinese cuisine. This strategic diversification initiative aims to expand occasion and category shares, catering to evolving consumer preferences and strengthening JFL’s competitive edge in the dynamic food service industry.

Management Guidance
■ JFL is prioritising volumetric growth and market share expansion under focused management strategies.
■ The company aims to optimise costs across its operations to enhance profit margins. In India, JFL plans to add 180 new Domino’s stores to bolster its market presence and cater to increasing consumer demand.
■ In Turkey, the company aims to establish 50 new Domino’s stores and 70 additional COFFY outlets, leveraging the growing café culture. In Bangladesh, JFL plans to add 20 new Domino’s stores to capitalise on the emerging market opportunities. Domestically, the focus is on introducing 50 new Popeyes’ locations and 25 Hong’s Kitchen outlets, diversifying the brand portfolio strategically.

Shareholding Pattern
Promoters hold 41.94 per cent, FIIs hold 23.24 per cent, DIIs hold 25.86 per cent, the government holds 0.2 per cent and the rest 8.42 per cent is held by public investors.

Valuation
Looking at the price to earnings (PE) ratio, the company at 148 times PE looks relatively cheaper than its peers like Devyani International, Westlife Food and Sapphire Foods. The company’s EV | EBITDA at 35.8 times also is at moderate levels compared to these peers. It is constantly able to grow its operating cash flow. JFL is also operating with negative working capital requirements. Overall, we believe the company is trading at moderate levels.

Potential Risks
■ Increase in cheese prices, which is a major raw material for the company.
■ Increasing competitive landscape due to a rise in local players.

Conclusion
Jubilant FoodWorks Limited stands as a dominant force in the pizza market across India and in selective international markets. The valuation of the stock also looks justifiable with ambitious plans for store expansions and a proven ability to generate robust operating cash flows. Considering these factors, we recommend BUY.