Jubilant FoodWorks: Hungry for growth

Shares of Jubilant FoodWorks hit a fresh record high of Rs 2,377, up 5% on the BSE in intra-day trade on Friday even as broader market sentiment remained subdued. The stock surpassed its previous high of Rs 2,310 touched on September 3, 2020. In the past month, it has gained 25% against a 1.2% rise in the S&P BSE Sensex.
While announcing the April-June quarter (Q1FY21) results on September 2, Jubilant FoodWorks’ management had said that the revenue recovery improved significantly in the months of July and August, with a recovery of 69.8% in July and 84.6% in August. Both the Delivery and Takeaway channels recovered fully by August and delivered a year-on-year (YoY) growth, with the Delivery channel growing at 110.9% like-for-like (LFL) and Takeaway at 161.0% LFL.
Jubilant FoodWorks enjoys the best financial metrics amongst the quick service restaurant (QSR) and with competition facing liquidity issues, its stronger profitability and balance sheet make it well-placed to gain share and boost its growth momentum.

In fact, QSR are expected to be the first beneficiaries of the recovery in discretionary consumption after the sharp slowdown due to the nationwide lockdown.
Going forward, the entire business model needs to change and technology, hygiene, and safety would become the key elements. Restaurants will have to focus on their delivery capacities and add value with initiatives such as special takeout-only menus. Further, contactless delivery will be the way to go. Seating capacity at restaurants is expected to fall to adhere to social distancing norms, which will reduce meal volumes.

Recovery in July/Aug at 70/85% is encouraging as dine-in pressure remained high. Jubilant is capitalising the situation (weaker competition, delivery friendly demand, and increase in delivery fee by aggregator) by charging a delivery fee (Rs 30/order). It will support operational performance in FY21. Cost control initiatives have resulted in positive earnings before interest, taxes, depreciation, and amortisation (EBITDA) of Rs 24 crore against the loss of Rs 42 crore by Westlife. Benign raw material prices, soft rental cost, and sustained delivery fee will drive the EBITDA margin in ensuing quarters.

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