Whalesbook
Prabhudas Lilladher has recommended a 'Buy' for Jubilant FoodWorks, setting a price target of Rs 576. The brokerage's report indicates that the company's fourth-quarter fiscal year 2026 like-for-like sales met expectations. EBITDA and Profit After Tax (PAT) exceeded targets, primarily due to healthy gross margin expansion driven by a better stock-keeping unit mix and lower overheads.
Popeyes Drives Growth
Popeyes continues its strong performance, achieving 28% same-store sales growth for fiscal year 2026. This positive trend is expected to continue into the first quarter of fiscal year 2027. DP Eurasia's performance has also improved, with the business now generating enough internal cash to cover its acquisition-related debt.
Domino's Faces Competitive Headwinds
While Domino's sales remain healthy, performance is tempered by challenges at Coffy, which is experiencing intense competition. Management anticipates Popeyes will contribute 1% to 1.5% to overall company growth in the near term. Jubilant FoodWorks has ambitious expansion plans for fiscal year 2027, targeting the opening of approximately 300 new stores, including Popeyes locations.
Margin Expansion Potential
Margins may face short-term pressure from wage inflation and geopolitical issues. However, the company's management is confident in achieving about 200 basis points of EBITDA margin expansion over FY24's adjusted EBITDA. This growth is expected to come from operating leverage and supply chain improvements. Prabhudas Lilladher forecasts an additional 90 basis points of EBITDA margin expansion between FY26 and FY28, driven by higher average ticket values, improved supply chain efficiencies, and benefits from technology investments.
Earnings Outlook
The brokerage projects a significant 33.1% standalone Earnings Per Share (EPS) compound annual growth rate (CAGR) for Jubilant FoodWorks from FY26 to FY28, building from a low base. Using a 26x FY28 EV/EBITDA multiple for the standalone business suggests a valuation of Rs 508 per share. An additional Rs 68 per share is attributed to DP Eurasia, based on its CY26 earnings and a 22x PAT multiple. The combined Sum-of-the-Parts (SOTP) valuation leads to the Rs 576 target price, a minor increase from the previous Rs 584. Prabhudas Lilladher sees Jubilant FoodWorks as well-positioned in the Quick Service Restaurant (QSR) sector to capitalize on an expected recovery in consumer spending.