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Accumulate Jubilant FoodWorks; target of Rs 1467: Prabhudas Lilladher

February 12
23:24 2019

Prabhudas Lilladher’s research report on Jubilant FoodWorks

We are downgrading FY20 and FY21 EPS of JUBI by 1.6% post imposition of 0.25% royalty from FY20 on brand jubilant by the promoter group, which is payable to Jubilant Enpro. We estimate that it will reduce estimated profits for FY20 and FY21 by Rs65.5mn and Rs76.8mn, i.e 1.6% of estimates. We believe that JUBI main USP is brands like Dominos and Dunkin Donuts, so we are unsure of the value which brand Jubilant contributes to the company. However we believe that it is not a solitary case and we have seen Tata Group charge for brands and Wadia Group charge Britannia for shared services. JUBI trades at 18.2xFY21 EV/ EBIDTA and 33.8xFY21 EPS with ROE of 28.3% and ROCE of 43.3%.

Outlook

We value the stock at 40xDec20 EPS and arrive at target price of Rs1467. We would advise buying into volatility at attractive prices. Retain Accumulate.

For all recommendations report, click here

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