Jubilant FoodWorks
Viewpoint
Cashing on indulgence opportunity in India’s hinterland CMP: Rs590
investor’s eye viewpoint
Brand Domino’s aggressively marking its entering into
tier III cities
Jubilant FoodWorks (Jubilant), an exclusive Indian master
franchisee of global brand “Domino’s Pizza” is aggressively
ramping up its presence in the hinterland of the Indian
market. Currently the company with ~ 357 stores spread
across 85 cities in India is way ahead of its competitors-
(Pizza hut ~150 stores, Mc Donalds ~170 stores, and KFC
~50 stores). The company is shoring up its presence in
the hinterland, with over 30% of its stores being
established in tier II and III cities. In the last few months
it has entered into various new tier III cities. The addition
includes cities like Calicut, Madurai, Gangtok, Raipur,
Jabalpur, Patna and Bhubaneswar. The overwhelming
response received by its stores across the new cities and
the increasing thrust of the management towards opening
stores in these new destinations is a clear testimony to
the pent up demand existing in India’s hinterland.
Consumerism wave here to stay—First mover to
harness the benefit
We believe that the attractive demographic profile
coupled with income and wealth effect would continue
to drive the strong consumer wave in the Indian economy.
More so, players engaged in these businesses coupled with
their first mover advantage are likely to be the greatest
beneficiaries of these tremendous opportunities presented
by the Indian consumer.
Jubilant—A quality play in the Indian consumption space
We believe that Jubilant with ~357 stores spread across
85 cities, and over 50% market share in the fast growing
Quick Supply Restaurant (QSR) segment with a strong
brand image, and a sustainable business model (negative
working capital, strong free cash generation) scores high
on the business success front. The company is expected
to clock in revenue and profit CAGR of 38% and 60%
respectively over FY2010-13E. Given the strong earnings
visibility and superior earnings quality (positive free cash
generation), the company would continue to enjoy
scarcity premium and is expected to trade at higher
valuation than the other listed consumption players. We
believe Jubilant to be a quality exposure in capturing the
growth in the Indian consumption space.
About Jubilant
Jubilant is primarily a food-service company and
currently operates Domino’s Pizza stores in India.The
company was incorporated in 1995 and initiated its
operations in 1996
Currently the company has the largest Quick Service
Restaurant (QSR) network of over 340 stores spread
across 81 cities
The company is the market leader in the organised
pizza market with a 50% overall market share and
65% share in the home delivery segment in India
The company focuses on a home delivery and takeaway
oriented business model
Apart from the Indian market, Jubilant is also a master
franchisee for the Domino’s pizza brand in Nepal,
Bangladesh and Srilanka.
The business performance so far
The company’s revenue and earnings have grown at a
CAGR of 40% and 74.2% respectively over the last four
years from FY2007-10. While for the last two quarters,
the overall revenue and earnings have grown at a
stellar 64% and 81% respectively, led by new strong
marketing efforts and new product offerings.
It has enjoyed operating margin in the range of 12-
16% over FY2007 to FY2010, while strong operating
leverage coming from employee and store rentals led
to strong expansion in the margins in H1FY2011 to
18.3%
Jubilant’s Indian Operations rank among the top three
within Domino’s global operations
Jubliant has developed a strong supply chain
management system with four regional supply centers
or commissaries – (Nodia [Delhi], Mumbai, Bangalore,
Kolkata) spread across the country. These centers
primarily manufacture dough and act as a warehouse
for other products. Thus the centralised purchase
function helps in negotiating better deals from the
vendors and enjoying the benefits of scale. The
company has a negative working capital cycle.
Sharekhan 8 December 22, 2010 Home Next
investor’s eye viewpoint
Valuation table
Particulars FY2009 FY2010 FY2011E* FY2012E* FY2013E*
Sales (Rs cr) 281 424 640 891 1,114
% growth - 51.1 50.9 39.3% 25.0
EBITDA (Rs cr) 34.0 66.5 120.5 175.4 244.0
EBITDA margin (%) 12.1 15.7 19.0 20.0 22.0
Net profit (Rs cr) 7.9 33.3 72.54 94.74 136.7
EPS (Rs) 1.26 5.18 11.84 15.36 21.31
% growth - 311 129 30 39
PE (x) 468.3 113.9 49.5 338.8 27.4
EV/EBITDA (x) 111.2 56.8 31.4 21.5 15.4
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