Covid-19 might be having a devastating impact on the revenues of quick service restaurants (QSRs), but the shares of this pizza maker have climbed 41 per cent year to date and 85 per cent in the last one year, suggesting no stress on the stock whatsoever.

This is even when the stock commands a trailing 12-month earnings per share of 220 times! This means an investor is paying Rs 220 for every Re 1 earned by the company in last 12 months.

The QSR, which commands a 72 per cent market share in the organised Indian pizza market last week posted a net loss of Rs 74 crore for June quarter, but that did not stop the stock from rallying 5 per cent that day.

This company is Jubilant Food Works. It owns the master franchise agreement with Domino’s International valid till 2024 and renewable thereafter for 10 years. The company also has exclusive rights for developing and operating the Dunkin’ Donuts restaurants in India.

JPMorgan says the company has all the ingredients in place. Its competitive moats have widened during the Covid crisis, and the pace of demand recovery has been encouraging.

Morgan Stanley appreciates the fact that the company managed to report ‘positive’ Ebitda in a tough quarter. This brokerage has taken heart from the fact that the company’s delivery and take-away sales would recover fully by this month.

Morgan Stanley appreciates the fact that the company managed to report ‘positive’ Ebitda in a tough quarter. This brokerage has taken heart from the fact that the company’s delivery and take-away sales would recover fully by this month.

As of Thursday, September 10, the stock had six ‘buy’, 12 ‘outperform’ and six ‘hold’ ratings on the publicly available Reuters Eikon database. There were also five ‘underperform’ calls, but no ‘sell’ rating.


Share Market Highlights: Sensex ends 364 points higher, Nifty at 11,466;  Kotak Bank, HDFC Bank top gainers


"Covid-19 added a share gain leg to the already-powerful exemplary execution in a fast-growing end-market story of Jubilant. Restaurant mortality in the QSR and casual dining space is likely to jump sharply. Consumer preference would shift towards more trusted brands now,” said Kotak Institutional Equities.

What does the management say
The company management says sales recovery stood at 70 per cent and 85 per cent in July and August, respectively over the year-ago quarters.

The QSR management said it would continue with its recently introduced delivery charges of Rs 30 per order, suggesting that there has been no impact on the demand recovery due to the fee. The operator of Domino's expects the competition to reduce materially as many peer restaurants have shut down.

The company itself plans to close 105 unprofitable stores that are located in malls and corporate parks with a dine-in focus. That said, it is looking forward to add another 100 stores in FY21 to maintain its store count.

Demand, it said, is expected to reach normalcy by the end of FY21. The company said the pace of store opening for Domino’s and Hong’s Kitchen would pick up next year. It said new stores will be of 750-1,000 sq ft in size, curated more towards delivery and takeaway.

While commodity prices are expected to remain soft going ahead, discounting may come back, the company anticipates.

Q1 earnings
The QSR reported a Rs 73.89 crore loss for June quarter compared with a Rs 71.64 crore profit reported for the corresponding quarter last year.

Revenues fell 59 per cent YoY to Rs 3,88.41 crore. Jubilant said Covid-19 adversely hurt its dine-in operations. During the quarter, the group negotiated several rent concessions and saw a deferred tax credit of Rs 23.30 crore.