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RECO : ACCUMULATE TP : Rs900
Investment Rationale
§ Same-Store-Sales growth was robust at 37% for FY11 and 35% in Q1FY12. In long term, Same-Store-Sales
growth should be 20% (higher then personal care products), equal to median growth
§ JFL has total store network of 387 Nos with presence in 93 cities. There is room to multiply the store network
atleast 2X in next 5 years. Accordingly, we have factored addition of 70 Nos every year for next 5 years,
equivalent to current run-rate
§ Eyeing new growth drivers in QSR segment- deploy excess cash generated from Dominos franchisee and
augment overall growth. JFL is hopeful to launch new brand in next 6-8 months. The same remains un-factored
in our earnings estimates
§ JFL trading at premium valuations - PER of 29.5X FY13E earnings. Valuations to sustain until (1) JFL ventures
into ROE dilutive business proposition and (2) new avenues for investment in QSR or foods service segment in
listed domain
Valuations
§ Remain positive on growth prospects of QSR segment in India and Dominos business model in particular. JFL
should witness robust earnings growth for next 5 years, backed by strong category growth at +20% (higher then
personal care products). We have ACCUMULATE rating with price target of Rs900/Share.
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