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Shares of Jubilant FoodWorks tanked 10 per cent on the NSE after the company reported dismal performance in the June 2016 quarter on Saturday. While the company’s revenues grew 7 per cent year-on-year, operating profit and net profit declined 14 per cent and 31 per cent, respectively, due to high fixed costs.
Same store sales growth, which means growth of stores operating for more than a year, declined 3.2 per cent y-o-y. This has happened for the first time in almost two years.
‘Hold’ to stayReligare Institutional Research in a note said it maintains its hold recommendation on the stock and has revised downward its target price by 17 per cent to ₹1,000 a share.
Jubilant’s management expects the performance to improve in Q2FY17 led by new product introductions (Burger Pizza and Pizza Mania Extreme) but Religare sees rapid market fragmentation, high fixed costs (from 130-140 new store additions), lack of pricing power and lower Dunkin’ profitability as risks to growth and margins.
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