The share price of Jubilant Foodworks fell around 15% in the first few hours of trade on March 14 and hit a 52-week low after the company announced the resignation of its chief executive officer, Pratik Pota.
The company informed of the CEO’s resignation in an exchange filing.
Jubilant Foodworks is currently trading near its 52-week low, as of March 14. This is at least 85% below its 52-week high of Rs 4,590. In the past 6 months, the stock fell nearly 39%. Read on to know why the stock of Jubilant Foodworks fell.
Jubilant Foodworks is among the largest foodservice company in the country and is well known for its brand – Domino’s Pizza. While the company reported stable financial performance in the recent December quarter, there are a few challenges for the company.
One, though covid related restrictions are largely lifted across the country, dine-in remain slow. The company’s delivery and takeaway channels grew, particularly in the last two quarters.
Two, the rise in input costs remains a concern for the company. That is, the cost of raw materials has increased. This could be due to multiple reasons – inflation, especially in commodities, increase in crude oil prices (transportation), among other things.
The company has taken price hike across its products to cushion its operating margin (EBITDA). EBITDA margin (% of sales) remained at 78% in the recent December quarter versus the same period last year. According to the management, despite the price increase Domino’s remains the most affordable Pizza brand.
Three, though Domino’s still commands good brand recognition and strong market penetration, competition is on the rise, particularly with Devyani International Sapphire Foods listing in recent months. But the huge network of Jubilant Foodworks and rapid store expansion could offer a better advantage in staying ahead of the competition.
And lastly, the high valuation of the stock had been a concern for many experts in the industry. However, the recent correction in the stock price may have brought down the valuation. The valuation is at 88 times the trailing-twelve-month of its earnings.
The company had reported approximately a 10% jump in its net profit during the October to December quarter in 2021. The net profit rose to Rs 137.3 crores however it was below some of the market estimates.
Revenue had risen almost 13% to Rs 1,193.5 crores.
Jubilant Foodwork’s board had approved a 1:5 stock split during the previous quarter as well.
The company had added 75 new stores of Dominos Pizza in the October to December quarter. This is the highest ever number of new store openings by any franchisee in any quarter in any market.
Dominos has around 1,500 stores in India.
Recently Popeyes, an American fast-food chain, opened its first store in India in Bengaluru. This was also launched by Jubilant Foodworks.
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Research Analyst: Bavadharini KS