Jubilant FoodWorks Shares Plummet 8% Amid Expectations of Near-Term Margin Disruption

Jubilant FoodWorks Shares Decline 8% Amid Margin Pressures

Shares of Jubilant FoodWorks, the parent company of Domino's Pizza in India, came under selling pressure following the release of weak March-quarter earnings. The stock declined by nearly 8% to an intraday low of Rs 434.95 on the National Stock Exchange (NSE).

Brokerages have expressed concerns over the company's ability to achieve its projected 5-7% like-for-like (LFL) sales growth due to elevated liquefied petroleum gas prices and higher logistics costs. Elara Securities, a domestic brokerage, noted that the company's guidance appears ambitious, given the challenging market environment. Elara projected medium-term LFL sales growth of 4-4.5% for the pizza chain.

According to Elara Securities, Jubilant FoodWorks could benefit from market share gains, as smaller quick-service restaurant (QSR) chains may struggle to expand amid inflationary pressures. The brokerage also expects the company's improved value positioning and higher delivery revenue mix to support reported LFL growth. However, Elara downgraded the stock to "accumulate" from "buy" and slashed the target price to Rs 500 from Rs 780.

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Elara Securities also lowered its EBITDA margin estimate for FY27 to 19% from 20.2% earlier, citing further price hikes as unlikely due to ongoing pressures linked to logistics, delivery staff expenses, store employee costs, and food inflation. The brokerage expects EBITDA margins for standalone India operations to remain around 21%, while projecting revenue and EBITDA CAGR of 12% and 16%, respectively, during FY26-FY28.

For the March quarter, Jubilant FoodWorks reported a 6% year-on-year rise in revenue, while adjusted EBITDA margin stood at 12%. Emkay Global Financial Services reduced its EBITDA estimates for the company's India operations by 6-7%, citing near-term cost pressures related to labor, utilities, and logistics. Despite this, Emkay retained its "buy" rating on the stock but cut the target price to Rs 550 from Rs 600.

Jubilant FoodWorks emerged as the top laggard on the Nifty 200 and Nifty 500 indices on May 21, with its shares declining by nearly 8%. The company's guidance of 5-7% LFL sales growth remains ambitious, and brokerages are cautious about its growth outlook due to ongoing margin pressures.

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