Jubilant Foodworks
BSE SENSEX
32,075
S&P CNX
9,916
17 July 2017
1QFY18 Results Update | Sector: Retail
CMP: INR1,275 TP: INR850 (-33%)
Sell
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Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
JUBI IN
66.0
65.3 / 1.0
1299 / 761
33/35/-4
680
55.0
Financials & Valuations (INR b)
Y/E Mar
2017 2018E 2019E
Net Sales
25.8
28.8
32.8
EBITDA
2.4
3.0
3.8
PAT
0.6
1.0
1.4
EPS (INR)
10.0
14.8
20.7
Gr. (%)
-32.1 48.0
40.0
BV/Sh (INR)
122.1 133.0 148.3
RoE (%)
8.2
11.1
14.0
RoCE (%)
8.4
11.6
14.7
P/E (x)
127.4 86.1
61.5
P/BV (x)
10.4
9.6
8.6
Estimate change
TP change
Rating change
SSSG better than expectation; ‘Everyday Value’ strategy receives good response
Results above expectations:
1QFY18 net sales grew 11.5% YoY (est. of +3%) to
INR6.8b, EBITDA rose 37.8% YoY (est. of +3%) to INR796m and adj. PAT
increased 25.6% YoY (est. of -4.8%) to INR181m. SSS grew 6.5% YoY (est. of
-3%) for the quarter.
Gross margin shrunk 40bp YoY to 76.4%
(est. of -200bp). Lower staff costs
(-130bp to 21.7%), other expenses (-120bp to 31.3%) and rent costs (-20bp to
11.6%) led to EBITDA margin expansion of 220bp YoY to 11.7% (est. of flat
margin).
Concall highlights:
(1) SSSG of 6.5% in 1QFY18 was led by growth in business
volumes, mostly due to good response to ‘Everyday Value’ strategy for
Domino’s Pizza. (2) Benefits of cost rationalization efforts in association with AT
Kearney will be witnessed mainly in 3QFY18 and 4QFY18. (3) 255bp negative
impact due to Dunkin Donuts on margins in 1QFY17 came down to 145bp in
1QFY18.
Valuation view:
Changes to the model have resulted in 21.8%/15.6% increase
in FY18/FY19 EPS. There is, however, no visibility on sustained SSSG growth
beyond the current year, with persistent weak urban consumer sentiment. For
a business that sells an expensive product and where competition has made
significant inroads into its forte of delivery, significant job creation needs to
happen and incomes need to rise sharply – there has been no evidence of this
so far. Although admirable, most of management’s efforts are just damage-
control, in our view. Double-digit SSSG is essential for sustained margin growth
for a business with cost inflation of 6-7%. Despite assuming staggering 54% EPS
CAGR over FY17-19, the stock trades at 61.5x FY19E EPS for a business that
does not make 15% RoE, even in FY19. Maintain
Sell
with a revised TP of
INR850 (multiple unchanged at 38x June 2019E EPS).
Krishnan Sambamoorthy
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
Vishal Punmiya
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Jubilant Foodworks
Key quarterly charts
Exhibit 1: SSS grew 6.5% v/s estimate of 3% decline
SSS Growth (%)
Exhibit 2: RM basket saw some inflation led by cheese,
while saving in cost led to EBITDA margin expansion
Gross Margin expansion (bps)
EBITDA Margin expansion (bps)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: Opened 13 and closed 5 Dominos restaurants in
1QFY18
Dominos stores
Cities
Exhibit 4: 9 Dunkin Donuts restaurants closed in 1QFY18,
while only 1 new restaurant was added
Dunkin' Donuts stores
Cities
Source: Company, MOSL
Source: Company, MOSL
Exhibit 5: Net sales grew 11.5% YoY to INR6.8b (est. 3% growth)
45.0 42.3
Net Sales (INR b)
39.0
29.3 26.1 27.6
18.5 18.6 20.3
14.8
21.4
25.0
14.4 14.0
0.0 0.0
6.7
13.3
3.9
(0.9)
11.5
Sales growth (%)
Source: MOSL, Company
17 July 2017
2

Jubilant Foodworks
Exhibit 6: Adj. PAT grew 25.6% YoY
PAT growth (%)
Exhibit 7: Gross margin contracted 40bp YoY
Gross Margin (%)
Source: MOSL, Company
Source: MOSL, Company
Exhibit 8: Staff costs were down 130bp YoY to 23.6%, other expenses were down 120bp to 31.3% and rent costs were down
20bp to 11.6% YoY
Staff Cost (%)
Rent Cost (%)
Other Expenditure (%)
Source: Company, MOSL
Exhibit 9: EBITDA margin thus expanded by 220bp YoY to
11.7%
EBITDA Margin (%)
Exhibit 10: Number of employees were down 1.1% YoY in
1QFY18; up 2.9% QoQ
No of Employees ('000)
Change in no of employees YoY (%)
Source: MOSL, Company
Source: MOSL, Company
17 July 2017
3

Jubilant Foodworks
1QFY18 Conference Call Highlights
Gradual recovery likely
Still early days on recovery. Much more needs to be done for sustained
profitable growth.
Yet to see strong consumer sentiment uplift in terms of metrics like walk-ins.
Ticket size has been more of a driver of SSS growth in 1QFY18.
Store days were also higher YoY in 1QFY18.
Both delivery and dine-in are recovering gradually. The delivery:dine mix
remains at 50:50.
Factors aiding SSSG growth/strategy to grow SSSG
SSSG of 6.5% in 1QFY18 was led by growth in business volumes, mostly due to
good response to ‘Every Day Value’ strategy for Domino’s Pizza.
‘Everyday Value’ is seeing good response in both bigger and smaller cities.
Management is and will look to drive innovation and product quality.
Cost savings and products
Some supply chain, logistics and G&A cost savings have been witnessed.
21 employees per store v/s 23 in 1QFY17. Employee per store may not show
further reduction.
Benefits of cost rationalization efforts, in association with AT Kearney, will be
witnessed mainly in 3QFY18 and 4QFY18. These are likely to be across costs like
materials, rent, utilities, and manpower.
Over the medium-to-longer term, gross margins may come down a bit as they
deliver more value, but management is aiming to offset this by savings in other
cost items.
Minimum wage increases likely in FY18.
Higher store days YoY also meant some higher costs.
Burger Pizza is doing well, despite absence of strong overall marketing for the
product in recent quarters.
Store closures/openings
Five closures in the quarter; two of them merged with stores in the proximity.
One of the closures was because of mall not picking up.
Only 19 stores closed in the past three quarters, out of a total of 1,125,
indicating the strength of the business model.
Store closures were of distributed vintage and not those opened in any
particular set of years.
Committed to earlier target of 40-50 store openings this year.
Re-imaging
2 stores re-imaged, 100 stores will be re-imaged this year.
1-2 days shutdown likely for re-imaging and cost will be INR1.4-1.5m per store.
Dunkin Donuts
Management reiterated earlier guidance of reducing EBITDA margin losses by
half on Dunkin Donuts in FY18 over FY17 levels.
4
17 July 2017

Jubilant Foodworks
255bp negative impact due to Dunkin on overall margins in 1QFY17 has come
down to 145bp in 1QFY18.
On Dunkin Donuts, it is closing down the most unprofitable stores, renegotiating
rentals, using smarter marketing, controlling overheads, indulging in lesser
discounting and focusing on every day value (new INR49 donuts compared to
INR62 earlier), and is looking at lower store sizes on new expansion.
Donuts and Coffee focus with limited food focus.
Not contemplating of giving up on brand. Over a two year period, planning to
make all stores profitable.
Financial highlights
The company passed on benefits of input tax credit and lower effective tax rate
in some states to customers.
INR90m store closure cost is part of depreciation. These are on account of fixed
improvements made to stores which cannot be sold off.
34% tax rate likely for FY18.
New commissary depreciation will come in 2QFY18 onward.
Valuation and view
Changes to the model have resulted in 21.8%/15.6% increase in FY18/FY19 EPS.
There is, however, no visibility on sustained SSSG growth beyond the current
year with weak urban consumer sentiment persisting.
For a business that sells an expensive product and where competition has made
significant inroads into their forte of delivery, significant job creation needs to
happen and incomes need to rise sharply, of which there is no evidence so far.
Most of the efforts of management, while admirable, are just damage control, in
our view. Sustained double-digit SSSG is essential to ensure sustainable margin
growth for a business with cost inflation of 6-7%.
Despite assuming a staggering 54% EPS CAGR over FY17-19, the stock trades at
61.5x FY19E EPS for a business that does not even make 15% RoE, even in FY19.
Maintain
Sell
with a revised target price of INR850 (multiple unchanged at 38x
June-2019E EPS).
Exhibit 11: Changes to the model have resulted in 21.8%/15.6% increase in FY18/FY19 EPS
respectively
New
Sales
EBITDA
PAT
FY18E
28,810
3,027
977
FY19E
32,792
3,760
1,367
FY18E
28,280
2,745
802
Old
FY19E
32,187
3,453
1,183
FY18E
1.9%
10.3%
21.8%
Change
FY19E
1.9%
8.9%
15.6%
Source: Company, MOSL
17 July 2017
5

Jubilant Foodworks
Exhibit 12: Jubilant Foodworks P/E (x)
150
120
90
60
30
0
21.3
72.0
69.5
PE (x)
Peak(x)
Avg(x)
Min(x)
139.3
Exhibit 13: Jubilant Foodworks P/E v/s Sensex
800
600
400
200
0
310.5
272.5
Jubilant Foodworks PE Relative to Sensex PE (%)
LPA (%)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 14: Valuation Matrix
Company
Consumer
Asian Paints
Britannia Inds.
Colgate-Palm.
Dabur India
Emami
Godrej Cons.
Hind. Unilever
ITC
Jyothy Lab.
Marico
Nestle India
P & G Hygiene
Page Industries
Pidilite Inds.
United Spirits
Retail
Jubilant Food.
Titan Company
Sell
1,275
850
545
-33
2
77
474
1.2
7.4
-32.1
18.5
48.0
13.8
40.0
18.2
127.4
59.0
86.1
51.8
61.5
43.8
8.2
20.6
0.2
0.5
Neutral 533
Neutral 1,126
Buy
Buy
Buy
3,697
1,070
1,070
5,502
1,153
326
1,240
4,450
1,335
315
1,265
930
4,500
1,260
380
405
360
5,990
9,082
240
835
850
2,415
10
20
25
4
18
-4
-18
9
17
10
10
-13
13
13
2
3
4
-12
1,072
446
291
535
244
667
229
2,466
4,096
66
423
657
260
189
20
413
214
388
16.7
6.9
4.5
8.3
3.8
10.4
3.6
38.3
63.6
1.0
6.6
10.2
4.0
2.9
0.3
6.4
3.3
6.0
8.7
7.3
-5.7
1.9
4.5
12.4
0.9
1.9
9.4
175.7
12.1
-1.6
11.5
15.0
-46.4
6.7
-23.0
87.1
10.0
16.0
20.8
6.7
6.6
15.4
6.5
16.1
14.9
-20.4
10.5
0.6
7.5
32.8
106.4
10.2
11.6
39.7
18.6
23.3
21.1
18.3
20.0
14.6
9.3
18.4
20.4
22.4
21.1
17.6
16.6
26.2
64.7
14.8
51.9
38.7
53.5
50.2
50.4
41.7
40.3
51.1
35.2
58.7
38.8
32.7
52.0
58.2
55.5
71.0
65.5
48.3
94.4
103.1
48.7
43.2
41.7
39.1
37.8
44.3
33.1
50.6
33.8
41.0
47.0
57.8
51.6
53.5
31.8
43.8
84.6
73.8
41.0
35.1
34.4
33.1
31.5
38.7
30.2
42.7
28.0
33.5
38.8
49.2
44.2
42.4
19.3
38.1
55.7
53.2
28.5
36.9
50.4
28.4
35.8
24.6
22.2
65.6
23.5
21.1
36.7
39.0
45.3
40.0
5.9
28.2
10.4
21.3
1.0
0.6
0.9
0.8
0.8
0.6
1.0
1.5
1.7
1.6
0.9
0.9
4.5
0.5
0.0
0.6
0.1
0.0
Reco
CMP
(INR)
Target
Price
Mkt Cap
USD B
EPS Growth YoY (%)
FY17
FY18E
FY19E FY17
P/E (x)
FY18E
FY19E
RoE
(%)
FY17
Div.
(%)
FY17
(INR) Upside (%) INR B
Neutral 303
Neutral 966
Buy
Buy
GlaxoSmith C H L Sell
Neutral 367
Neutral 327
Sell
Buy
Buy
6,862
8,036
16,952 19,125
Parag Milk Foods Neutral 236
Neutral 808
Neutral 2,755
United Breweries Neutral 821
Source: Company, MOSL
17 July 2017
6

Jubilant Foodworks
Financials and Valuations
Income Statement
Y/E March
Net Sales
Change (%)
Material Consumed
Gross Profit
Gross Margin %
Operating expenses
EBITDA
Change (%)
Margin (%)
Depreciation
Other Non-recurring Inc.
PBT
Change (%)
Margin (%)
Tax
Tax Rate (%)
Adjusted PAT
Change (%)
Margin (%)
Reported PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Lease Deposits
Capital WIP
Investments
Deferred tax assets
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Other Current Liabilities
Creditors
Provisions
Net Curr. Assets
Appl. of Funds
E: MOSL Estimates
2014
17,372
22.8
4,534
12,838
73.9
10,333
2,505
3.6
14.4
787
85
1,803
-7.0
10.4
620
34.4
1,182
-9.8
6.8
1,182
2015
20,937
20.5
5,279
15,659
74.8
13,098
2,561
2.2
12.2
1,011
65
1,615
-10.4
7.7
504
31.2
1,111
-6.1
5.3
1,111
2016
24,380
16.4
5,801
18,579
76.2
15,942
2,637
3.0
10.8
1,282
116
1,470
-9.0
6.0
501
34.1
969
-12.8
4.0
969
2017
25,834
6.0
6,308
19,526
75.6
17,115
2,411
-8.6
9.3
1,554
147
1,004
-31.7
3.9
345
34.3
660
-31.9
2.6
578
2018E
28,810
11.5
7,086
21,723
75.4
18,696
3,027
25.5
10.5
1,712
165
1,480
47.3
5.1
503
34.0
977
48.0
3.4
977
2019E
32,792
13.8
8,055
24,736
75.4
20,977
3,760
24.2
11.5
1,873
185
2,072
40.0
6.3
704
34.0
1,367
40.0
4.2
1,367
(INR Million)
2020E
38,020
15.9
9,481
28,539
75.1
24,022
4,517
20.1
11.9
1,999
207
2,725
31.5
7.2
927
34.0
1,799
31.5
4.7
1,799
(INR Million)
2020E
659
10,682
11,341
17
11,358
19,001
11,758
7,243
2,003
804
1,628
-693
6,693
779
247
5,335
332
6,319
1,171
4,819
330
374
11,359
2014
654
4,846
5,500
146
5,647
8,065
2,601
5,464
921
196
937
-375
1,102
331
90
246
435
2,599
659
1,825
115
-1,497
5,647
2015
656
5,806
6,462
144
6,606
10,810
3,438
7,373
1,142
199
746
-578
1,287
433
119
389
346
3,564
704
2,555
305
-2,276
6,606
2016
658
6,961
7,619
17
7,637
12,904
4,619
8,285
1,363
261
908
-729
1,404
552
125
332
396
3,854
722
2,960
172
-2,450
7,637
2017
659
7,394
8,053
18
8,071
14,505
6,173
8,332
1,496
608
936
-693
1,535
607
161
354
413
4,143
799
3,142
202
-2,608
8,070
2018E
659
8,109
8,769
18
8,786
15,804
7,886
7,919
1,634
608
1,123
-693
2,783
679
179
1,512
413
4,587
886
3,470
230
-1,803
8,787
2019E
659
9,121
9,780
17
9,797
17,346
9,759
7,587
1,804
699
1,359
-693
4,280
772
204
2,891
413
5,239
1,009
3,989
241
-958
9,798
17 July 2017
7

Jubilant Foodworks
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
EV/Sales
EV/EBITDA
P/BV
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Debtor (Days)
Inventory (Days)
Creditor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Depreciation & Amort.
Interest Paid
Direct Taxes Paid
Incr in WC
CF from Operations
Extraordinary Items
Incr in FA
Free Cash Flow
Incr in lease deposits
Pur of Investments
CF from Invest.
Issue of Shares
Incr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2014
18.1
84.1
0.0
0.0
2015
16.9
98.6
0.0
0.0
2016
14.7
115.8
2.5
16.9
2017
10.0
122.1
2.5
25.0
2018E
14.8
133.0
3.0
20.3
2019E
20.7
148.3
4.5
21.7
2020E
27.3
172.0
3.0
11.0
70.5
4.7
32.9
15.2
75.2
3.9
32.3
12.9
86.5
3.4
31.3
11.0
127.4
3.2
34.3
10.4
86.1
2.8
26.9
9.6
61.5
2.4
21.2
8.6
46.7
2.0
17.1
7.4
21.5
23.5
31.0
2
7
38
3.1
17.2
18.1
22.3
2
8
45
3.2
12.7
13.6
15.7
2
8
44
3.2
8.2
8.4
9.1
2
9
44
3.2
11.1
11.6
14.8
2
9
44
3.3
14.0
14.7
24.0
2
9
44
3.3
15.9
17.0
39.4
2
7
46
3.3
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(INR Million)
2020E
2,725
-207
1,999
0
927
-1,112
4,702
0
1,760
2,942
199
269
2,228
0
0
237
207
-30
2,444
2,891
5,335
2014
1,803
-85
787
0
620
-332
2,217
0
2,357
-140
260
-3
2,615
15
24
0
226
265
-133
378
246
2015
1,615
-65
1,011
0
504
-923
2,979
0
2,748
232
221
-191
2,778
21
-2
0
-77
-58
143
246
389
2016
1,470
-116
1,282
0
501
-117
2,252
0
2,156
97
221
162
2,538
54
-126
197
498
228
-57
389
332
2017
1,004
-147
1,554
0
345
-179
2,246
-82
1,948
216
133
28
2,027
50
0
198
-50
-197
22
332
354
2018E
1,480
-165
1,712
0
503
-353
2,877
0
1,300
1,578
138
187
1,625
0
0
237
142
-95
1,158
354
1,512
2019E
2,072
-185
1,873
0
704
-535
3,590
0
1,633
1,958
170
236
2,039
0
-1
356
185
-172
1,380
1,512
2,891
17 July 2017
8

Jubilant Foodworks
Corporate profile
Company description
Jubilant Foodworks is the master franchisee of
Domino’s Pizza Inc in India with 67% market share of
organized Pizza market. The Company is the market
leader in the organized pizza market with a 50% overall
market share and 70% share in the home delivery
segment in India. JFL focuses on a home delivery and
takeaway oriented business model, which offers its
customers the convenience of eating in the comfort of
their own homes and workspaces. The company also
holds master franchise of Dominos in Sri Lanka, Nepal
and Bangladesh.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Jun-17
44.9
12.1
29.8
13.1
Mar-17
45.0
13.3
28.9
12.9
Jun-16
45.0
12.2
31.7
11.1
Exhibit 3: Top holders
Holder Name
Reliance Capital Trustee Co. Ltd.
AZIM PREMJI TRUST
Franklin Templeton Mutual Fund A/C
Franklin India Prima Plus
JP Morgan Sicav Investment Company
(Mauritius) Limited
PRAZIM TRADING AND INVESTMENT CO.
PVT. LTD
% Holding
3.8
2.3
2.3
1.6
1.5
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
Shyam S Bhartia
Hari S Bhartia
Ajay Kaul
Mona Aggarwal
Designation
Chairman
Co-Chairman
Whole Time Director & CEO
Company Secretary
Exhibit 5: Directors
Name
Arun Seth
Ramni Nirula
Name
Phiroz Vandrevala
Vishal Marwaha
Source: Capitaline
Exhibit 6: Auditors
Name
Chandrasekaran Associates
S R Batliboi & Co LLP
Type
Secretarial Audit
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
FY20
MOSL
forecast
14.8
20.7
27.3
Consensus
forecast
16.2
23.1
32.3
Variation
(%)
-8.8
-10.2
-15.5
Source: Bloomberg
Source: Capitaline
17 July 2017
9

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17 July 2017
10