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4QFY11 results
Jubilant reported in-line 4Q results with sales growth of 56% YoY and net
profit growth of 86% YoY. Same store growth was better than expected
at 33% despite the tough base of 38% in 4Q10. Ebitda margins were up
150bps YoY but down 30bps QoQ, supported by flat QoQ gross margins
despite food inflation pressures. The company is targeting 80 store
openings in FY12 in Domino’s alongside 20% same store sales growth
and at least flat margins. We have made modest upgrades to our
forecasts and increased our target price to Rs750, 6% upside. However,
the 29% rise in the stock since our initiation drives a downgrade to O-PF.
Healthy top line growth; cost pressures under control
Jubilant’s 56% YoY sales growth in 4QFY11 was underpinned by 33% same
store sales growth. This was delivered against a base of 68% sales growth
and 38% same store sales in 4QFY10. Jubilant added 14 stores during the
quarter, taking the base to 378, and is now present in 90 cities. Ebitda grew
72% YoY while PBT grew 147%. Net profit growth was a more modest 86%
due to taxes. Gross margins were down 40bps YoY at 74.5% and were flat
QoQ despite the inflationary trend in food prices. Whilst rent and other costs
grew slower than sales on a YoY basis, staff cost increases were higher at
61% YoY. On a QoQ basis, overall operating costs grew faster than sales and
drove an Ebitda margin decline of 30bps. Looking ahead, the ~5.5% price
hike taken in April should ease the cost pressures. The company is guiding for
20% same store sales growth and at least flat Ebitda margins in FY12.
Accelerating expansion plans; balance sheet healthy
Jubilant is targeting 80 new stores for FY12 in the Domino’s format against
the 70 in FY10 and 72 in FY11, signalling acceleration in store growth. The
company is targeting the “all day part food” segment through the Dunkin’
Donuts format. Whilst Jubilant is targeting 80-100 openings over five years,
expansion will be phased with the first store expected to open only in
4QFY12. Jubilant’s balance sheet and underlying cash generation is strong
enough to support this. The company had no debt, Rs89m of cash and
Rs216m of investments at the year end. Worryingly, the company did lend out
~Rs310m of inter-corporate deposits to an undisclosed recipient.
Earnings upgrades from extra stores
Given the higher store openings, we have upgraded our revenue, Ebitda and
net profit estimates for FY12-13 by 1-3%. This also drives a 3% increase in
our DCF based target price to Rs750 (FY13 PE of 34x and EV/Ebitda of
18.6x). Over FY11-14, we expect revenue to become 2.6x and PBT 3.1x.
Whilst we remain firmly convinced about the long term potential of the
business, the 29% share price run up since our initiation in March limits near
term upside. We downgrade Jubilant Foods to O-PF from BUY earlier.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 results
Jubilant reported in-line 4Q results with sales growth of 56% YoY and net
profit growth of 86% YoY. Same store growth was better than expected
at 33% despite the tough base of 38% in 4Q10. Ebitda margins were up
150bps YoY but down 30bps QoQ, supported by flat QoQ gross margins
despite food inflation pressures. The company is targeting 80 store
openings in FY12 in Domino’s alongside 20% same store sales growth
and at least flat margins. We have made modest upgrades to our
forecasts and increased our target price to Rs750, 6% upside. However,
the 29% rise in the stock since our initiation drives a downgrade to O-PF.
Healthy top line growth; cost pressures under control
Jubilant’s 56% YoY sales growth in 4QFY11 was underpinned by 33% same
store sales growth. This was delivered against a base of 68% sales growth
and 38% same store sales in 4QFY10. Jubilant added 14 stores during the
quarter, taking the base to 378, and is now present in 90 cities. Ebitda grew
72% YoY while PBT grew 147%. Net profit growth was a more modest 86%
due to taxes. Gross margins were down 40bps YoY at 74.5% and were flat
QoQ despite the inflationary trend in food prices. Whilst rent and other costs
grew slower than sales on a YoY basis, staff cost increases were higher at
61% YoY. On a QoQ basis, overall operating costs grew faster than sales and
drove an Ebitda margin decline of 30bps. Looking ahead, the ~5.5% price
hike taken in April should ease the cost pressures. The company is guiding for
20% same store sales growth and at least flat Ebitda margins in FY12.
Accelerating expansion plans; balance sheet healthy
Jubilant is targeting 80 new stores for FY12 in the Domino’s format against
the 70 in FY10 and 72 in FY11, signalling acceleration in store growth. The
company is targeting the “all day part food” segment through the Dunkin’
Donuts format. Whilst Jubilant is targeting 80-100 openings over five years,
expansion will be phased with the first store expected to open only in
4QFY12. Jubilant’s balance sheet and underlying cash generation is strong
enough to support this. The company had no debt, Rs89m of cash and
Rs216m of investments at the year end. Worryingly, the company did lend out
~Rs310m of inter-corporate deposits to an undisclosed recipient.
Earnings upgrades from extra stores
Given the higher store openings, we have upgraded our revenue, Ebitda and
net profit estimates for FY12-13 by 1-3%. This also drives a 3% increase in
our DCF based target price to Rs750 (FY13 PE of 34x and EV/Ebitda of
18.6x). Over FY11-14, we expect revenue to become 2.6x and PBT 3.1x.
Whilst we remain firmly convinced about the long term potential of the
business, the 29% share price run up since our initiation in March limits near
term upside. We downgrade Jubilant Foods to O-PF from BUY earlier.
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