Brokerage Reaction: Jubilant Foodworks
Shares of the fast food chain operator hit a record high in today’s session, after brokerage firm Jefferies initiated coverage on the stock with a buy recommendation.
Jefferies’ Rationale:
- Industry faces severe headwinds led by Covid-19 concerns
- Increased customer focus on hygiene & quality augurs well for branded players like Jubilant
- Industry share of QSR restaurants is abysmally low at < 5% but should gain over time
- Tough macro will result in 14% decline in FY21 SSG
- Valuations are at a significant premium to history
- See 25%+ EPS CAGR over FY20-23E
- Key Risks: Continued disruption from Covid-19, stiff competition from food aggregators, reversal of delivery fees and weak consumer sentiment
Shares gained as much as 5.6% to an all-time high of Rs 2,444 and are up for the second straight day. Jefferies has set a price target of Rs 2,650 on the stock.
