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1QFY12: strong results
Jubilant reported better than expected results for 1QFY12 with sales
growth of 60% YoY and net profit growth of 52% YoY despite a higher
tax rate. Same store growth was better than expected at 36.7% despite
the tough base of 37% in 1QFY11. Ebitda margins were up 50bps YoY
and 200bps QoQ, driven by operating leverage benefits. The company has
not seen any signs of a slowdown in demand so far and looks well set to
beat its guidance of 20% SSG and at-least flat margins. We have
upgraded our FY12-13 forecasts by 9-10% to reflect higher same store
growth, raising our target price to Rs865. The rich headline valuations
supported by a strong franchise and growth potential. Retain O-PF.
Healthy top line growth; cost pressures under control
Jubilant’s 60% YoY sales growth in 1QFY12 was underpinned by 36.7% same
store sales growth. This was delivered against a base of 59% sales growth
and 37% same store sales in 1QFY11. Jubilant added 14 stores during the
quarter, taking the base to 392 across 93 cities. Ebitda grew 65% YoY while
PBT grew 81%. Net profit growth was a more modest 52% due to taxes.
Gross margins were down 100bps YoY at 74.5% and were flat QoQ. Costs
grew slower than sales on a YoY as well as QoQ basis, driving Ebitda margin
expansion. The company is planning another 2.5-3% price hike in August and
raw material cost pressures should remain under control.
Growth momentum continues, no signs of a slowdown yet
This was the sixth successive quarter of 30%+ same store sales growth for
Jubilant Foods. Whilst the base is tougher still in 2QFY12 (48% same store
growth), the pace of sales/store already achieved should help Jubilant
maintain 20%+ same store growth on a YoY basis. Unlike mainstream
retailers, Jubilant has not seen demand slacken in June-August and the risk of
earnings disappointments in the coming quarters is lower than retail peers.
Whilst wage hikes in 2Q will prevent margins from being maintained at the
19%+ level, they should still remain significantly stronger on a YoY basis.
Earnings upgrades from extra stores
We expect Jubilant to beat its guidance of 20%+ same store growth and at
least flat Ebitda margins, modelling in 28%+ SSG and 90bps of margin
expansion for the year. We have upgraded our FY12-13 estimates by 9-10%.
This, along with a 3 month roll forward, drives a 15% increase in our DCF
based target price to Rs865 (FY13 PE of 36x and EV/Ebitda of 20.1x). The
company has not invested any additional amounts in ICDs. Over FY11-14, we
expect revenue to become 2.7x and PBT 3.4x with substantially more
headroom for long term growth. This, along with lower earnings risks in the
near term, makes Jubilant our preferred pick in retail. Retain O-PF.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1QFY12: strong results
Jubilant reported better than expected results for 1QFY12 with sales
growth of 60% YoY and net profit growth of 52% YoY despite a higher
tax rate. Same store growth was better than expected at 36.7% despite
the tough base of 37% in 1QFY11. Ebitda margins were up 50bps YoY
and 200bps QoQ, driven by operating leverage benefits. The company has
not seen any signs of a slowdown in demand so far and looks well set to
beat its guidance of 20% SSG and at-least flat margins. We have
upgraded our FY12-13 forecasts by 9-10% to reflect higher same store
growth, raising our target price to Rs865. The rich headline valuations
supported by a strong franchise and growth potential. Retain O-PF.
Healthy top line growth; cost pressures under control
Jubilant’s 60% YoY sales growth in 1QFY12 was underpinned by 36.7% same
store sales growth. This was delivered against a base of 59% sales growth
and 37% same store sales in 1QFY11. Jubilant added 14 stores during the
quarter, taking the base to 392 across 93 cities. Ebitda grew 65% YoY while
PBT grew 81%. Net profit growth was a more modest 52% due to taxes.
Gross margins were down 100bps YoY at 74.5% and were flat QoQ. Costs
grew slower than sales on a YoY as well as QoQ basis, driving Ebitda margin
expansion. The company is planning another 2.5-3% price hike in August and
raw material cost pressures should remain under control.
Growth momentum continues, no signs of a slowdown yet
This was the sixth successive quarter of 30%+ same store sales growth for
Jubilant Foods. Whilst the base is tougher still in 2QFY12 (48% same store
growth), the pace of sales/store already achieved should help Jubilant
maintain 20%+ same store growth on a YoY basis. Unlike mainstream
retailers, Jubilant has not seen demand slacken in June-August and the risk of
earnings disappointments in the coming quarters is lower than retail peers.
Whilst wage hikes in 2Q will prevent margins from being maintained at the
19%+ level, they should still remain significantly stronger on a YoY basis.
Earnings upgrades from extra stores
We expect Jubilant to beat its guidance of 20%+ same store growth and at
least flat Ebitda margins, modelling in 28%+ SSG and 90bps of margin
expansion for the year. We have upgraded our FY12-13 estimates by 9-10%.
This, along with a 3 month roll forward, drives a 15% increase in our DCF
based target price to Rs865 (FY13 PE of 36x and EV/Ebitda of 20.1x). The
company has not invested any additional amounts in ICDs. Over FY11-14, we
expect revenue to become 2.7x and PBT 3.4x with substantially more
headroom for long term growth. This, along with lower earnings risks in the
near term, makes Jubilant our preferred pick in retail. Retain O-PF.
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