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Buy Jubilant Foodworks, target Rs 1,750: HDFC Securities

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HDFC Securities has a buy call on Jubilant Foodworks (JFL) with a target price of Rs 1,750.

The current market price of Jubilant Foodworks is Rs 1,301.25.

Time period given by the brokerage is one year when Jubilant Foodworks price can reach the defined target.

Investment rationale by the brokerage-

We believe JFL has enough levers to sustain healthy performance in FY20/21E given (1) Return to store expansion (focus on splitting stores in metros and expansion in smaller towns), (2) Filling gaps in the Menu, (3) Focus on new customer acquisition and driving frequency, (4) Benefits from sporting events (Cricket World Cup 2019 and reschedule in IPL will support 1HCY19 performance), (5) Turnaround of Dunkin’ and Launch of new QSR brand.

We model 18/11/10% SSG growth during FY19E/FY20E/FY21E. We increase EPS estimates by 2/4% for FY20/21E to factor in higher SSG, store expansion and margin expansion. We reiterate our BUY rating, we had upgraded JUBI when the stock was at Rs 636 on July-17. We roll forward JFL at 46x P/E on Mar-21EPS with a target price of Rs 1,750 (earlier Rs 1,620 on Dec-20 EPS).

Our strategic view is that positives will almost always look priced-in, especially on a rising base. But the opportunity for JFL to deliver positive surprises will likely ensure a multi-year flowering for the stock.

Source: Economic Times