21 May 2020 Results Review 4QFY20 Jubilant FoodWorks Foodworks... · weaker consumption sentiments and slower store expansion in FY21/FY22. We value JUBI at 40x on Mar-22E EPS, deriving

21 May 2020 Results Review 4QFY20

Jubilant FoodWorks

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Good franchise, a pause before run Jubilant was on course to returning to double digit SSG (7/13% SSG in Jan/Feb) after mid-single digit clocked in the previous four quarters. It justified our thesis on Domino’s SSG recovery even when street was factoring aggregator pressure. Covid impacted OOH consumption sharply, thereby, Domino’s March SSG saw sharp dip of 28% yoy. QSR will be among the most impacted categories in FY21 (stated in our FMCG thematic report) as dine-in pressure will be immense. We continue to believe that Jubilant is one of the strongest QSR players (superior store economics, healthy FCFs, strong balance sheet) and will be able to gain market share. However, high impact on OOH consumption will have several challenges for growth (co is also returning to muted store expansion in FY21). We believe even in such challenging time, JUBI will be able to cut cost sharply to sustain margin (overhead cost is 55% of sales). However, we cut EPS estimate by 5% for FY21/FY22 (43/22% cut in our FMCG thematic in April) to factor-in consistent extension of lockdown, weaker consumption sentiments and slower store expansion in FY21/FY22. We value JUBI at 40x on Mar-22E EPS, deriving a TP of Rs 1,420. With unattractive risk-reward at current price, we downgrade JUBI to REDUCE. In-line SSG: Net revenues grew by 4% yoy (vs. exp of flat revenue) as ex-

SSG growth remained strong. Reported SSG saw a yoy decline of 3.4% (est. decline 4.1%) while LFL SSG dipped by 2.3% yoy. However, ex-SSG growth was strong at 7% led by strong store expansion in 9MFY20. LFL SSG in Jan/Feb was at 7/13%. Covid halted store expansion to 10 stores in 4Q which >30 stores was planned to open in March. Those unopened stores will be carried over and opened in 1QFY21. Store opening will be weaker and we reduced the new store count to 60/100 for FY21/FY22 (earlier 120/110).

Miss in margins: GM contracted 164bps to 74.4% (exp. dip of 46bps) led by steep dairy inflation, inflation to moderate in FY21. Co could not get enough time to cut down cost in March, thereby LFL EBITDA margin declined by 686bps yoy to 10% (est 16%). Co is focusing on converting several fixed cost into variable cost like employee cost is being shifted from full time/part time model to flexi-time model. We believe this model will help the company control costs without cutting headcounts and will also provide clear visibility to riders and other store staff.

Call & other takeaways: (1) Co has reopened 930 stores (covering 87% of the delivery area), (2) Only carried over stores (30 stores) from 4QFY20 will be opened in 1QFY21, (3) Several cost control initiatives will be visible from 1Q, (4) Momentum in Hong’s was strong pre-Covid, (5) JUBI’s BS remains strong, Cash & Equivalent has risen to Rs 7bn vs. Rs 6.6bn in FY19.

Financial Summary

YE Mar (Rs mn) Q4

FY20 Q4

FY19 YoY (%)

Q3 FY20

QoQ (%)

FY19 FY20P FY21E FY22E

Net Sales 8,979 8,652 3.8 10,596 (15.3) 35,631 39,273 34,130 43,832

EBITDA 1,695 1,476 14.8 2,536 (33.2) 5,998 8,756 7,496 10,541

APAT 520 793 (34.4) 1,123 (53.7) 3,180 3,537 2,736 4,686

Diluted EPS (Rs) 3.94 6.01 (34.4) 8.51 (53.7) 24.1 26.8 20.7 35.5

P/E (x)

63.1 56.7 73.4 42.8

EV / EBITDA (x)

32.4 33.9 40.2 25.5

RoCE (%)

45.8 28.4 11.5 21.7

Source: Company, HSIE Research

REDUCE CMP (as on 20 May 2020) Rs 1,521

Target Price Rs 1,420

NIFTY 9,067

KEY CHANGES

OLD NEW

Rating ADD REDUCE

Price Target Rs 1,502 Rs 1,420

EPS % FY21E FY22E

-5% -5%

KEY STOCK DATA

Bloomberg code JUBI IN

No. of Shares (mn) 132

MCap (Rs bn) / ($ mn) 201/2,654

6m avg traded value (Rs mn) 1,901

52 Week high / low Rs 1,974/1,078

STOCK PERFORMANCE (%)

3M 6M 12M

Absolute (%) (19.2) (4.4) 16.2

Relative (%) 5.9 19.8 37.9

SHAREHOLDING PATTERN (%)

Dec-19 Mar-20

Promoters 41.94 41.94

FIs & Local MFs 18.93 20.65

FPIs 32.65 30.94

Public & Others 6.48 6.47

Pledged Shares 1.21 1.52

Source : BSE

Naveen Trivedi [email protected] +91-22-6171-7324

Varun Lohchab [email protected] +91-22-6171-7334 Aditya Sane [email protected] +91-22-6171-7336

Page | 2

Jubilant FoodWorks: Results Review 4QFY20

Jubilant FoodWorks Consumer Quarterly Commentary Particulars 1QFY20 2QFY20 3QFY20 4QFY20 Industry/ Co Strategy

- Dine-in category has seen pressure - Delivery has seen growth across the board, driven largely by aggregators - Media spend by aggregators has seen an increase in order to drive customer acquisition

- Weak consumer sentiment and inflationary pressure is a drag on the margins in the industry - Expect organized food services industry to delivery sustained growth

- Demand environment remained challenging - Dine-in remained under pressure across the industry - Part of the impact on dine-in was due to a structural shift observed from dine-in towards delivery driven by aggregator push - Civil disturbances (protest)in various parts of the country also impacted industry - Food inflation was unprecedented, dairy inflation is still high but veg inflation has moderated

- Supply chains were disrupted for the entire food industry - SSG trajectory was consistently positive in Jan, Feb and first half of March - As of now 930 stores have been opened which cover 87% of delivery area pre-Covid. Expect to cover 100% are by mid June. - Recovery in stores that have opened in encouraging - Co expects dine-in to be impacted post Covid. However, it is focusing on DELCO stores with the expectation that lost dine-in will be partially recovered through takeaway.

Revenue

Dominos’ - OLO contribution to delivery sales is now 81% - Begun rolling out a new store design with digital kiosks. 9 out of 26 stores opened used this design - Undertook a small price increase towards the end of the quarter - Launched a new range of pizzas under 'World Pizza League' - Dominos in Bangladesh continued to see encouraging response, on track to open 5 stores by end of FY20 - Willing to look at alternative models but the delco store model is better than the cloud kitchen model for Dominos due to its brand equity - Fortressing of markets in order to improve customer service levels will be the strategy going forward - Co is focusing on incurring expenses to set up the infrastructure and use tech to drive process efficiencies

- OLO contribution to delivery increased to 85% - All stores opened used the new store design - Dominos opened 2nd store in Bangladesh - Reduction in delivery time is a sharp area of focus and the co has tried a 20 min delivery pilot in a few stores - Fortressing markets and splitting stores has helped improve customer experience - Growth in delivery compensated for the headwinds in dine-in - Beverages have been launched by creating fountain infrastructure and are seeing a positive response - Co views aggregators as partners but the entire delivery fleet will be Dominos - There was a moderation of growth in smaller towns - Co does not have any plans to opt for sub franchising

- OLO contribution to delivery sales stood at 87.4% - Growth in delivery was much higher than the co, driven mainly by metros and tier 1 cities - MGT gives a guidance of a total 140-150 new stores in FY20 (98 opened in 9M). Store opening trajectory will continue in FY21 - Refurbished stores (improved ambience and modern look) have witnessed better growth in Dine-in - Fountain rollout will start showing result from upcoming season - A new range of Masala Pizzas and a new marketing campaign was supporting - The co does not have any plans for a price hike in the near future - Civil disturbances had an impact of <100bps on SSG - Domino's app is the highest rated food app in India. The co has made digital investment that will help personalise promotions and payment & ordering experience. Also launched a chatbot - Bulk of OLO are still on Domino's app - Domino's gained market share at Pan-India level

- Reduction in store opening was not a planned restriction by the co. Disruption due to Covid-19 caused reduced store opening. - New store opening has been suspended in 1QFY21. The only stores opened will be the ones that have rolled over from 4QFY20. - Domino’s essentials is now live in almost 100 cities. - Restricted seating due to social distancing is expected to impact dine-in post-Covid. Co hopes zero contact delivery and takeaway will help recover some of the loss in dine-in. Post covid competitive intensity will decrease as restaurants will close. Takeaway and online ordering will witness a pickup.

Page | 3


Others - Hong's got off to a good start, plan is to open 10 stores by the end of FY20 - Close one store in Dunkin

- Continue to witness encouraging response on Hong's Kitchen - There was no change in number of stores for Dunkin - Focus on building a profitable business in Dunkin by finding the right balance of food, beverage and donuts

- Co opened 2 new Dunkin' stores opened, both are smaller format stores (100 sqft) to see effectiveness of such format (pilot). - Hong's will see more store opening in the coming quarters, Hong's has seen high repeat customer rate

- Jubilant added 2 stores each in Dunkin’ and Hong’s Kitchen - Hong’s saw strong momentum pre-Covid. The pickup has been encouraging since stores reopened as well. Co plans to begin opening DELCO focused stores in Hong’s. Initially, co will remain focused on NCR and then expand further.

Margin Gross Margin - Price hike was taken towards

the end of the quarter to offset the inflation in RM, especially dairy - However, impact of price increase on GM will be seen from next quarter - Beverages will be a key driver of GMs in the upcoming quarters

- Inflation on dairy was significant but it was mitigated partly by price increase - Inflation has now flattened and it expected to moderate over the upcoming quarters

- Dairy and veg inflation were high during the qtr. Veg inflation has moderated while dairy inflation remained firm. Dairy prices were the highest in Oct-Nov in more than 7 years. Dairy inflation (cheese) on impacted GM by 220bps YoY.

- Inflation in Dairy last year was significant. However, Dairy inflation has now come down. The benefit was not reflected in 4QFY20 due to carried over inventory. It will be reflected from 1QFY21 onwards.

EBITDA Margin

- Co has shifted to reporting under IndAS 116 from 1QFY20 - Increase in personnel cost was due to minimum wage inflation, annual increment and new stores - Large part of increase in expenses was due to A&P

- EBITDA margin improved despite steep inflation in commodity prices led by the price increase, targeted promotions, delivery efficiencies and manpower productivity

- Targeted promotions helped the co maintain margins - Inflation on manpower (for delivery) per order has gone down. Lower attrition at industry and JFL level is supporting the manpower cost - Promotion and discounts carried out by the co were done without impacting SSG adversely - Other expenses increased mainly due to higher delivery mix, increase in investment in digital and new marketing campaign

- Jubilant is revisiting cost structures and identifying opportunities to improve efficiencies. - Co has activated the force majeure clause and has made progress on rent reduction. - Co does not expect employee expenses to be a structural issue going forward as the co can drive efficiency using data collected resulting in lower manpower requirements. Also, Jubilant has shifted delivery manpower from fixed timers to flexi timers. Hence, employee cost is not expected to be a headwind. - Significant saving opportunities have been identified on logistics and warehousing costs.

Page | 4


Quarterly Financial Snapshot

Particulars (Rs mn) 4QFY20 4QFY19 YoY (%) 3QFY20 QoQ

(%) FY20 FY19

YoY (%)

Net Revenue 8,979 8,652 3.8 10,596 (15.3) 38,858 35,307 10.1

Material Cost 2,296 2,071 10.9 2,659 (13.6) 9,706 8,759 10.8

Employee Expenses 1,960 1,689 16.1 2,072 (5.4) 7,846 6,725 16.7

Rent Expenses 983 875 12.4 967 1.7 3,801 3,411 11.5

Other Expenses 2,815 2,541 10.8 3,129 (10.0) 11,705 10,335 13.3

EBITDA 1,695 1,476 14.8 2,536 (33.2) 8,771 6,078 44.3

Adj EBITDA 916 1,476 (37.9) 1,762 (48.0) 5,770 6,078 (5.1)

Depreciation 916 400 129.1 880 4.2 3,441 1,523 126.0

EBIT 778 1,076 (27.7) 1,656 (53.0) 5,330 4,555 17.0

Interest 410 - na 426 na 1,634 - na

Other Income 204 151 34.8 159 28.3 688 469 46.7

PBT before exceptional 573 1,228 (53.3) 1,815 (68.5) 6,018 5,024 19.8

Exceptional item 323 79 na - na 448 79 na

PBT 250 1,148 (78.2) 1,815 (86.2) 5,570 4,945 12.6

Tax 39 409 (90.4) 352 (88.8) 1,295 1,717 (24.5)

RPAT 210 740 (71.5) 1,463 (85.6) 4,275 3,228 32.4 Adj (IND AS, Exceptional & one time tax) 310 53 na (340) na (770) 53 na

APAT 520 793 (34.4) 1,123 (53.7) 3,504 3,281 6.8

Adjusted EPS 3.9 6.0 (34.4) 8.5 (53.7) 53.2 49.8 6.8 Source: Company, HSIE Research

Quarterly Performance Analysis

As a % of Revenue 4QFY20 4QFY19 YoY

(bps) 3QFY20

QoQ (bps)

FY20 FY19 YoY

(bps)

Material Cost 25.6 23.9 164 25.1 48 25.0 24.8 17

Employee Expenses 21.8 19.5 231 19.6 228 20.2 19.0 115

Rent Expenses 10.9 10.1 84 9.1 182 9.8 9.7 12

Other Expenses 31.4 29.4 199 29.5 183 30.1 29.3 85

EBITDA 18.9 17.1 181 23.9 (506) 22.6 17.2 536

Adj EBITDA 10.2 17.1 (686) 16.6 (643) 14.9 17.2 (236)

Tax Rate 15.8 33.3 (1,754) 19.4 (365) 23.3 34.7 (1,146)

APAT 5.8 9.2 (337) 10.6 (480) 9.0 9.3 (28)


Net revenues grew by 4% yoy (vs. exp of flat revenue) as ex-SSG growth remained strong. Reported SSG saw a yoy decline of 3.4% (est. decline 4.1%) while LFL SSG dipped by 2.3% yoy GM contracted 164bps to 74.4% (exp. dip of 46bps) led by steep dairy inflation LFL EBITDA margin declined by 686bps yoy to 10% (est 16%).

Page | 5


Net Revenue Same Store Sales Growth (Reported)

Source: Company, HSIE Research Source: Company, HSIE Research

EBITDA Performance EBITDA Margin


Domino’s Quarterly Store Additions Cities Covered


-8

0

8

16

24

32

2,000

4,000

6,000

8,000

10,000

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

Net Sales Growth - RHS

Rs mn%

-3 -2-5

27 5 3 2 3

-3

4

-3-8

7 6

18

2726

2115

6 4 5 6

-3

(14.0)

(5.0)

4.0

13.0

22.0

31.0

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

%

(30)(15)0 15 30 45 60 75 90 105 120 135

0

400

800

1,200

1,600

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

EBITDA Growth - RHS

Rs mn%

12.8

12.4

12.2 13

.112

.911

.810

.3 11.5

11.5

9.5 9.7

9.7

9.9 11

.7 14.1

17.2

16.4

16.6

16.7 18

.417

.115

.7 16.4

16.6

10.2

-

5.0

10.0

15.0

20.0

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

%

0

10

20

30

40

50

0

270

540

810

1,080

1,350

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

Number Of Stores At The End Store Addition - RHS

Nos Nos

150

154 16

7 184 19

6 208 21

822

5 235 24

825

1 260

264

264

264

265

266

266

267

271

273

276

276

282

282

0

50

100

150

200

250

300

4QFY

141Q

FY15

2QFY

153Q

FY15

4QFY

151Q

FY16

2QFY

163Q

FY16

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

Page | 6


OLO and Mobile Ordering Performance Download of Mobile App


Domino’s Yearly Store Additions Domino’s Yearly SSG (Reported)


Domino’s City Coverage Dunkin’ Stores


36% 41

%47

%47

%

51%

51% 57

%60

% 63% 65

%68

% 73% 75

%81

% 85%

87% 89

%

38%

38% 54

% 56% 68

%69

%69

% 71%

78% 83

%85

%85

%88

%89

% 93%

95%

96%

0%

20%

40%

60%

80%

100%

120%

4QFY

161Q

FY17

2QFY

173Q

FY17

4QFY

171Q

FY18

2QFY

183Q

FY18

4QFY

181Q

FY19

2QFY

193Q

FY19

4QFY

191Q

FY20

2QFY

203Q

FY20

4QFY

20

OLO to Delivery Sales % Mobile Ordering sales to OLO (%)

29%

36% 51

% 63% 75

%

89%

23%

38%

68% 78

% 88% 96

%

0%

15%

30%

45%

60%

75%

90%

105%

FY15

FY16

FY17

FY18

FY19

FY20

OLO to Delivery Sales % Mobile Ordering sales to OLO (%)37

8 465 57

6 726 87

6 1,02

6

1,11

7

1,13

4

1,22

7

1,33

5

1,39

5

1,49

5

0

450

900

1,350

1,800

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

E

FY22

E

37%

30%

16%

2% 0% 3% -2%

14% 16

%

3%

-18%

34%

-30.0%

-18.0%

-6.0%

6.0%

18.0%

30.0%

42.0%

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

E

FY22

E

105123

150

196

235264 266 273 282

0

50

100

150

200

250

300

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

No. of cities covered (India)

10

26

54

7163

3731 34

4250

0

10

20

30

40

50

60

70

80

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

E

FY22

E

Page | 7


Gross Margin Trend EBITDA Margin Trend


74.9

%

74.3

%

73.8

%

73.9

%

74.8

%

76.2

%

75.6

%

74.6

% 75.1

%

75.0

%

76.0

%

76.1

%

73%

74%

75%

76%

77%

78%FY

11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

E

FY22

E

17.7

%

18.4

%

17.1

%

14.4

%

12.2

%

10.8

%

9.3%

14.6

% 16.8

%

14.5

%

14.0

% 16.8

%

0%

6%

11%

17%

22%

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20

FY21

E

FY22

E

Page | 8


Assumptions Particulars FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Revenue

Stores at beginning 465 576 726 876 1,026 1,117 1,134 1,227 1,335 1,395

Additions 111 150 150 150 91 17 93 108 60 100

Stores at the end 576 726 876 1,026 1,117 1,134 1,227 1,335 1,395 1,495

Revenue Growth (%) 38.4% 22.4% 20.4% 16.2% 5.6% 17.1% 18.5% 10.1% -13.3% 28.7%

SSG (%) 16.2% 1.6% 0.1% 3.2% -2.4% 13.9% 16.4% 3.2% -18.2% 34.3%

Like-like SSG (%) 16.2% 1.6% 0.1% 3.2% -2.4% 13.9% 17.3% 4.5% -17.1% 35.0%

Margin

Gross Margin (%) 73.9% 74.0% 74.9% 76.3% 75.8% 74.8% 75.2% 75.0% 75.6% 75.8%

Employee (% of sales) 19.1% 19.5% 21.2% 23.6% 23.0% 20.3% 19.0% 20.2% 20.9% 20.0%

Rent (% of sales) 8.3% 9.0% 9.9% 10.5% 11.7% 10.6% 9.7% 2.1% 2.5% 2.9%

Adj. Rent (% of sales) 8.3% 9.0% 9.9% 10.5% 11.7% 10.6% 9.7% 9.8% 10.6% 10.0%

ASP (% of sales) 4.5% 5.1% 5.5% 5.2% 5.6% 4.8% 4.8% 5.2% 4.5% 4.6%

Power & Fuel (% of sales) 5.2% 5.9% 5.8% 5.7% 5.6% 5.3% 4.7% 4.7% 4.6% 4.6%

Franchisee Fee (% of sales) 3.4% 3.2% 3.3% 3.3% 3.3% 3.3% 3.5% 3.5% 3.5% 3.3%

Others (% of sales) 16.1% 16.4% 16.6% 16.8% 16.9% 15.6% 16.2% 16.6% 17.2% 15.8%

Margin Breakup

EBITDA Margin (%) 17.4% 14.8% 12.7% 11.3% 9.7% 15.0% 17.2% 22.8% 22.5% 24.5%

Adj EBITDA Margin (%) 17.4% 14.8% 12.7% 11.3% 9.7% 15.0% 17.2% 14.9% 14.4% 17.2%

Employee (No) 19,734 24,969 27,108 27,719 26,604 27,539 29,184 26,700 27,900 29,900

Employee/store (No) 37.9 38.4 33.8 29.1 24.8 24.5 24.0 20.8 20.4 20.7

Tax Rate 32% 33% 28% 33% 31% 34% 35% 28% 25% 25%

NPM (%) 9.3% 6.8% 5.3% 4.0% 2.6% 6.4% 8.9% 9.0% 8.0% 10.7%

Unit Level Economics Particulars (Rs mn) FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E

Net Sales/Store 27.0 26.5 25.9 25.3 23.8 26.5 29.9 30.3 24.7 30.0

Gross Profit/Store 20.0 19.6 19.4 19.3 18.0 19.8 22.5 22.8 18.7 22.7

Employee/Store 5.2 5.2 5.5 6.0 5.5 5.4 5.7 6.1 5.2 6.0

Rent/Store 2.2 2.4 2.6 2.7 2.8 2.8 2.9 3.0 2.6 3.0

ASP/Store 1.2 1.3 1.4 1.3 1.3 1.3 1.4 1.6 1.1 1.4

Franchise/Store 0.9 0.9 0.8 0.8 0.8 0.9 1.1 1.1 0.9 1.0

Packaging material/Store 1.1 1.1 1.0 0.9 0.8 0.8 1.0 1.0 0.8 1.0

Freight/Store 0.8 0.8 0.8 0.7 0.7 0.8 0.9 0.9 0.7 0.9

Adj EBITDA/Store 4.7 3.9 3.3 2.9 2.3 4.0 5.1 4.5 3.6 5.2

Adj Depreciation/Store 1.1 1.2 1.2 1.3 1.4 1.4 1.3 1.3 1.3 1.3

PAT/Store 2.6 1.9 1.5 1.1 0.7 1.8 2.8 2.7 1.9 3.1

Page | 9


Change in Estimates FY21E FY22E

OLD NEW Chg (%) OLD NEW Chg (%)

Net Sales 38,704 34,130 (11.8) 48,050 43,832 (8.8) EBITDA 7,565 7,496 (0.9) 11,016 10,541 (4.3) APAT 4,950 4,789 (3.3) 7,765 7,385 (4.9) EPS 2,884 2,736 (5.1) 4,955 4,686 (5.4)

Peer Set Comparison

Company Mcap

(Rs bn)

CMP (Rs/sh) Reco TP

EPS (Rs) P/E (x) EV/EBITDA (x) Core RoCE (%)

FY20E/ CY19P

FY21E/ CY20E

FY22E/ CY21E

FY20E/ CY19P

FY21E/ CY20E

FY22E/ CY21E

FY20E/ CY19P

FY21E/ CY20E

FY22E/ CY21E

FY20E/ CY19P

FY21E/ CY20E

FY22E/ CY21E

HUL 4,303 1,988 REDUCE 1,969 31.7 37.1 41.9 62.7 53.6 47.5 42.9 36.9 32.7 230.7 46.5 28.8

ITC 2,154 176 BUY 221 12.5 11.9 13.0 14.0 14.7 13.5 9.5 10.1 9.0 44.5 43.4 48.0

Nestle 1,573 16,318 REDUCE 14,042 206.0 237.6 278.2 79.2 68.7 58.7 52.7 47.2 41.3 75.0 70.7 69.1

Dabur 775 440 REDUCE 447 9.0 10.0 11.2 48.9 43.9 39.4 39.1 36.2 32.2 51.4 52.7 55.9

Britannia 749 3,118 REDUCE 2,711 56.4 61.9 71.4 55.3 50.4 43.7 40.3 36.2 31.8 41.1 43.4 47.2

GCPL 578 566 REDUCE 529 14.4 15.7 17.6 39.3 36.0 32.1 27.8 27.3 24.8 19.0 18.9 21.4

Marico 410 318 REDUCE 283 8.0 8.4 9.4 39.6 37.7 33.6 27.9 26.6 24.4 41.8 43.2 46.5

United Spirits

417 574 ADD 586 11.9 13.7 16.1 50.1 42.0 35.7 28.6 26.1 22.7 17.9 19.1 20.8

Colgate 368 1,352 ADD 1,372 29.8 32.0 36.1 45.3 42.3 37.4 28.7 26.8 24.0 69.6 72.7 80.5

Jubilant 201 1,521 REDUCE 1,420 26.8 20.7 35.5 56.7 73.4 42.8 33.9 40.2 25.5 28.4 11.5 21.7

Emami 92 203 REDUCE 221 11.7 11.6 13.0 17.3 17.4 15.6 12.4 12.4 11.1 23.2 24.1 29.9

Radico Khaitan

40 300 BUY 371 16.1 19.6 23.2 18.6 15.3 12.9 11.3 9.6 8.0 14.9 14.3 15.8


Page | 10


Financials Consolidated Income Statement Year End (March) - Rs mn FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E Net Revenues 20,928 24,380 25,834 30,184 35,631 39,273 34,130 43,832 Growth (%)

16.5% 6.0% 16.8% 18.0% 10.2% -13.1% 28.4%

Material Expenses 5,279 5,801 6,308 7,660 8,861 9,835 8,201 10,491 Employee Expense 4,443 5,765 5,948 6,140 6,818 7,964 7,034 8,680 A&P Expense 1,133 1,253 1,437 1,428 1,709 2,021 1,515 1,993 Rent 2,050 2,539 2,986 3,157 3,411 829 845 1,278 Other Expenses 5,472 6,385 6,744 7,399 8,835 9,868 9,038 10,849 EBITDA 2,551 2,637 2,411 4,401 5,998 8,756 7,496 10,541 EBITDA Growth (%)

3.4% -8.6% 82.5% 36.3% 46.0% -14.4% 40.6%

EBITDA Margin (%) 12.2% 10.8% 9.3% 14.6% 16.8% 22.3% 22.0% 24.0% Adj EBITDA 2,551 2,637 2,411 4,401 5,998 5,712 4,789 7,385 Adj. EBITDA Growth (%) 2.2% 3.4% -8.6% 82.5% 36.3% -4.8% -16.2% 54.2% Adj. EBITDA Margin (%) 12.2% 10.8% 9.3% 14.6% 16.8% 14.5% 14.0% 16.8% Depreciation 1,011 1,282 1,554 1,601 1,575 3,523 3,258 3,735 EBIT 1,540 1,354 857 2,800 4,423 5,233 4,239 6,806 Other Income (Including EO Items) 75 116 147 231 474 696 621 753 Interest - - - - - 1,652 1,203 1,296 PBT 1,615 1,470 1,004 3,031 4,897 4,277 3,656 6,262 Total Tax 504 501 305 1,068 1,717 1,240 920 1,576 RPAT 1,111 969 578 1,962 3,180 2,788 2,736 4,686 Exceptional Gain/(loss) - net of taxes - - (85) 44 - (749) - - Adjusted PAT 1,111 969 663 1,918 3,180 3,537 2,736 4,686 APAT Growth (%) #REF! -12.8% -31.6% 189.3% 65.8% 11.2% -22.7% 71.3% Adjusted EPS (Rs) 8.5 7.4 5.0 14.5 24.1 26.8 20.7 35.5 EPS Growth (%)

-13.1% -31.7% 189.2% 65.8% 11.2% -22.7% 71.3%

Consolidated Balance Sheet Year End (March) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E SOURCES OF FUNDS

Share Capital - Equity 656 658 659 660 1,320 1,320 1,320 1,320 Reserves 5,806 6,962 7,394 9,017 11,140 11,283 13,161 16,784 Total Shareholders Funds 6,462 7,620 8,053 9,677 12,459 12,602 14,480 18,104 Minority Interest - - - - 26 28 31 34 Long Term Debt - - - - - - - - Short Term Debt - - - - - - - - Total Debt - - - - - - - - Net Deferred Taxes 578 729 693 550 500 (760) (760) (760) Other Non-current Liabilities & Provns 132 1 4 5 5 15,252 14,216 13,232 TOTAL SOURCES OF FUNDS 7,171 8,351 8,750 10,232 12,990 27,123 27,968 30,610 APPLICATION OF FUNDS

Net Block 7,141 8,013 7,550 7,527 7,712 8,197 9,024 9,348 CWIP 199 183 608 124 152 407 407 407 Other Non Current Assets 1,232 1,422 1,904 1,881 2,189 15,368 14,238 13,804 Intangible Assets 231 349 451 383 388 386 386 386 Total Non-current Assets 8,804 9,967 10,513 9,915 10,441 24,357 24,055 23,945 Inventories 433 552 607 642 771 947 823 1,057 Debtors 119 125 161 157 274 166 145 186 Other Current Assets 256 337 336 333 271 289 264 311 Cash & Equivalents 1,135 1,239 1,290 3,921 6,687 7,258 8,425 12,174 Total Current Assets 1,943 2,253 2,394 5,053 8,003 8,660 9,656 13,728 Creditors 2,424 2,960 3,142 3,890 4,167 4,470 4,208 5,404 Other Current Liabilities & Provns 1,151 910 1,014 845 1,287 1,424 1,536 1,659 Total Current Liabilities 3,576 3,869 4,157 4,735 5,454 5,894 5,743 7,063 Net Current Assets (1,633) (1,616) (1,763) 318 2,549 2,767 3,913 6,665 TOTAL APPLICATION OF FUNDS 7,171 8,351 8,750 10,232 12,990 27,123 27,968 30,610


Page | 11


Consolidated Cash Flow (Rs mn) FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E Reported PBT 1,615 1,470 883 3,031 4,897 4,028 3,656 6,262 Non-operating & EO Items 59 170 49 (25) 26 - - - Interest Expenses (Net) (60) (112) (141) (166) (314) 956 583 544 Depreciation 1,011 1,282 1,554 1,601 1,575 3,523 3,258 3,735 Working Capital Change 488 (308) 57 912 (14) 354 20 997 Tax Paid (352) (386) (366) (1,262) (1,779) (1,240) (920) (1,576) OPERATING CASH FLOW ( a ) 2,761 2,117 2,036 4,091 4,390 7,621 6,597 9,961 Capex (2,863) (2,264) (1,996) (1,160) (1,657) (2,373) (2,581) (2,200) Free Cash Flow (FCF) (102) (147) 40 2,931 2,733 5,247 4,016 7,761 Investments 180 208 26 (2,258) (3,134) 137 25 (625) Non-operating Income 60 59 86 99 216 696 621 753 INVESTING CASH FLOW ( b ) (2,623) (1,997) (1,883) (3,319) (4,575) (1,540) (1,935) (2,072) Debt Issuance/(Repaid)

Interest Expenses

- - - - (1,652) (1,203) (1,296)

FCFE (102) (147) 40 2,931 2,733 3,595 2,812 6,465 Share Capital Issuance 9 21 50 (150) 186 - - - Dividend - (197) (198) (198) (397) (1,452) (990) (1,188) Others

- - - (2,605) (1,502) (1,856)

FINANCING CASH FLOW ( c ) 9 (177) (148) (347) (211) (5,709) (3,695) (4,340) NET CASH FLOW (a+b+c) 147 (57) 5 424 (396) 371 967 3,549 EO Items, Others

0 (18) (512) (3,985) - - -

Closing Cash & Equivalents 389 332 354 1,290 4,879 5,250 6,217 9,766

Key Ratios Particulars FY15 FY16 FY17 FY18 FY19 FY20P FY21E FY22E PROFITABILITY (%)

GPM 74.8 76.2 75.6 74.6 75.1 75.0 76.0 76.1 EBITDA Margin 12.2 10.8 9.3 14.6 16.8 22.3 22.0 24.0 EBIT Margin 0.1 0.1 3.3 9.3 12.4 13.3 12.4 15.5 APAT Margin 0.1 0.0 2.6 6.4 8.9 9.0 8.0 10.7 RoE 18.6 13.8 8.5 21.6 28.7 28.2 20.2 28.8 RoIC (or Core RoCE) 19.2 13.6 8.2 26.5 45.8 28.4 11.5 21.7 RoCE 16.6 12.5 7.8 20.2 27.4 23.5 13.2 19.3 EFFICIENCY

Tax Rate (%) 31.2 34.1 30.4 35.3 35.1 29.0 25.2 25.2 Fixed Asset Turnover (x) 2.9 3.0 3.2 3.9 4.5 4.6 3.6 4.5 Inventory (days) 7.6 8.3 8.6 7.8 7.9 8.8 8.8 8.8 Debtors (days) 2.1 1.9 2.3 1.9 2.8 1.5 1.5 1.5 Other Current Assets (days) 4.5 5.1 4.7 4.0 2.8 2.7 2.8 2.6 Payables (days) 42.3 44.3 44.4 47.0 42.7 41.5 45.0 45.0 Other Current Liab & Provns (days) 20.1 13.6 14.3 10.2 13.2 13.2 16.4 13.8 Cash Conversion Cycle (days) (48.3) (42.8) (43.1) (43.6) (42.4) (41.7) (48.3) (45.9) PER SHARE DATA (Rs)

EPS 8.5 7.4 5.0 14.5 24.1 26.8 20.7 35.5 CEPS 16.2 17.1 16.8 26.7 36.0 53.5 45.4 63.8 Dividend 1.3 1.5 1.5 3.0 5.0 6.0 7.5 9.0 Book Value 49.3 57.9 61.1 73.3 94.4 95.5 109.7 137.2 VALUATION

P/E (x) 179.6 206.6 302.6 104.6 63.1 56.7 73.4 42.8 P/BV (x) 30.9 26.3 24.9 20.7 16.1 15.9 13.9 11.1 EV/EBITDA (x) 77.8 75.4 82.7 44.7 32.4 33.9 40.2 25.5 EV/Revenues (x) 9.5 8.2 7.7 6.5 5.4 4.9 5.6 4.3 OCF/EV (%) 1.4 1.1 1.0 2.1 2.3 3.9 3.4 5.3 FCF/EV (%) (0.1) (0.1) 0.0 1.5 1.4 2.7 2.1 4.1 FCFE/Mkt Cap (%) (0.1) (0.1) 0.0 1.5 1.4 1.8 1.4 3.2 Dividend Yield (%) 0.1 0.1 0.1 0.2 0.3 0.4 0.5 0.6


Page | 12


Rating Criteria BUY: >+15% return potential ADD: +5% to +15% return potential REDUCE: -10% to +5% return potential SELL: >10% Downside return potential

Date CMP Reco Target 16-May-19 1,243 BUY 1,739

9-Jul-19 1,222 BUY 1,755 25-Jul-19 1,158 BUY 1,778 22-Sep-19 1,380 BUY 2,022 11-Oct-19 1,300 BUY 2,092 23-Oct-19 1,430 BUY 2,134 30-Dec-19 1,627 BUY 2,184 9-Jan-20 1,714 BUY 2,175

30-Jan-20 1,749 BUY 2,175 2-Mar-20 1,757 ADD 2,073 13-Apr-20 1,422 ADD 1,502 14-Apr-20 1,384 ADD 1,502 21-May-20 1,521 REDUCE 1,420

From 2nd March 2020, we have moved to new rating system

RECOMMENDATION HISTORY

900

1,100

1,300

1,500

1,700

1,900

2,100

May

-19

Jun-

19

Jul-1

9

Aug

-19

Sep-

19

Oct

-19

Nov

-19

Dec

-19

Jan-

20

Feb-

20

Mar

-20

Apr

-20

May

-20

Jubilant FoodWorks TP

Page | 13


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Documents

21 May 2020 Results Review 4QFY20 Jubilant FoodWorks Foodworks... · weaker consumption sentiments and slower store expansion in FY21/FY22. We value JUBI at 40x on Mar-22E EPS, deriving