Jubilant Foodworks Ltd. Q4FY23 Result Update

Jubilant FoodWorks believes in a world powered by simplicity, flavour and cutting edge technology. That’s why they are the first in the industry to incorporate AI, IoT and breakthroughs that push the envelope, to author food-tech innovations.

Trusted by global brands – Domino’s Pizza, Dunkin’(Coffee & Donuts) and Popeyes®(Fried Chicken), they curate the best blend of food & tech for our consumers. Taking this responsibility a step further, they have successfully launched 3 other homegrown brands – Hong’s Kitchen (Chinese Cuisine), ChefBoss(Ready -to-Cook) & Ekdum!(Biryani).

With current presence across India, Bangladesh & Sri Lanka; exclusive rights to expand operations in Nepal & Bhutan and recent investments in Domino’s Eurasia (Turkey, Russia, Azerbaijan and Geogia), they are a truly Global Indian MNC and one of the top 100 companies in India by market cap with 1500+ restaurants across 300+ cities.

Results Highlights

In Q4FY23, the company’s revenue grew by 8.0% YoY to Rs. 1,269.8 crores due to increased store additions and double-digit growth in orders. However, weak consumer sentiment resulted in a decrease in average ticket size and negative like-for-like (LFL) growth of 0.6%, impacting the company’s trend of double-digit revenue growth. Domino’s LFL average daily sales declined to Rs. 81,430 compared to Rs. 85,756 in Q3FY23.

The gross profit (GP) margin decreased by 166 basis points (bps) YoY to 75.6% in Q4FY23, mainly due to higher cheese prices. However, the company managed to limit the sequential decline to 14 bps through timely cost management, data-related efficiencies, and declining prices in other commodities.

The EBITDA fell by 13.0% QoQ and 14.0% YoY to Rs. 249.1 crores in Q4FY23, with the EBITDA margin declining to 19.6% from 24.6% in Q4FY22. This was primarily due to adverse operating leverage. Additionally, an impairment charge of Rs. 20 crores in its Sri Lankan subsidiary further impacted the profitability.

As a result, the net profit after tax (PAT) declined to Rs. 28.5 crores in Q4FY23, down 64.5% QoQ and 70.3% YoY. The PAT margin stood at 2.3% in the quarter compared to 8.2% in Q4FY22.
The board of directors has recommended a dividend of Rs. 1.2 per equity share.

Valuation and Outlook

Jubilant Foodworks Ltd. reported weak performance in Q4FY23 with subdued average daily sales (ADS) and negative like-for-like (LFL) growth of 0.6%. This was due to weaker consumer demand and a lack of price hikes. Margins were under pressure due to high inflation in wheat and dairy prices. The EBITDA margin declined to 19.6% in Q4FY23 compared to 24.6% in Q3FY23. The company’s revenue fell short of market expectations.

In the short term, caution is advised in the quick-service restaurant (QSR) space due to inflationary pressures and weak volume-driven growth. The company’s increased local marketing activities and store renovations are worth monitoring. However, in the long term, there is optimism about the business due to expansion plans for Popeyes, focus on LFL growth, increasing dine-in presence, and improving delivery time for higher volume-driven growth.

Key Concall Highlights

1. Q4FY23 saw sustained margin pressure due to high cheese and dairy prices, along with weak consumer sentiment.
2. Cheese prices are expected to remain elevated in the next two quarters.
3. The company plans to strengthen its value offerings and improve its like-for-like (LFL) growth.
4. Cost control and productivity enhancement initiatives are being implemented to protect margins.
5. Domino’s added 54 new stores, but LFL growth declined to -0.6% in Q4FY23. Annual LFL and same-store sales growth were 8.9% and 6%, respectively, in FY23.
6. Popeyes expanded to 13 stores, with one new opening in Chennai in Q4FY23.
7. A 20-minute delivery service guarantee was launched in Bengaluru, a first in India and globally for Domino’s.
8. The Bengaluru commissary is on schedule for commissioning, serving over 750 stores in the region.
9. Plans to open 200-225 new Domino’s stores and 30-35 new Popeyes stores in FY24.
10. No further price hikes indicated for Q1FY24 to protect gross profit (GP) margins.
11. Capex is expected to be high due to investment in the Mumbai commissary.
12. Other expenses increased due to higher marketing costs and changes in variable manpower mix.

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