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    Jubilant FoodWorks' Popeyes: Right ingredients for significant ramp-up, stock can rally 41%, says ICICI Securities

    Synopsis

    The brokerage forecasts Jubilant to add over 100 stores in FY24. The market may eventually expand to accommodate both brands - Popeyes and KFC; however, KFC does have an air pocket to tackle for now as we assign a high probability of new Popeyes stores in the same catchment as KFC, it said

    Jubilant FoodWorks' Popeyes: Right ingredients for significant ramp-up, stock can rally 41%, says ICICI SecuritiesiStock
    Impressed with Jubilant FoodWorks's Popeyes store, which marks its entry into Chennai and expansion from Bangalore in the fried chicken market, the domestic brokerage firm maintained its Buy rating on the stock with a target price of Rs 630, which signals an upside potential of 41% from the current market price of Rs 447 per share.

    "The store atmosphere is appealing with vibrant colours and a contemporary look and feel, self-ordering kiosk, good lighting and highest seating capacity amongst Popeyes India outlets (with a separate section for ‘open to sky’ table seating). These features differentiate the store's look from a superior proposition. Its Cajun flavour offerings are unique in India QSR, and we reckon it has a high probability of consumer acceptance," ICICI Securities said.

    A casual positioning (set between fast food and casual dining) fits well with JUBI’s strengths – focusing on value-for-money and delivery, it said.

    The brokerage forecasts Jubilant to add over 100 stores in FY24. The market may eventually expand to accommodate both brands - Popeyes and KFC; however, KFC does have an air pocket to tackle for now as we assign a high probability of new Popeyes stores in the same catchment as KFC, it said.

    At 12.37 the stock was trading flat at Rs 447 on BSE. The stock has fallen about 26% in the last six months, while it has declined nearly 12% year-to-date.

    The launch of the store has gained a google rating of 4.4. The store is the largest Popeyes India outlet, currently with a seating capacity of 150 split into two divisions (108 indoor and 42 outdoor with an ‘open to sky’ arrangement).

    "Popeyes is likely to benefit from Jubliant’s existing backend infrastructure, including in-house digital and data strength, supply chain, commissary, management team, etc. Supplies to the store will be sourced directly from the company's commissary (at Bangalore) and refilled on a daily basis. The raw materials – be it the chicken, sandwich/burger patties and fries – are centrally controlled, helping the brand to retain tastes and flavours across its chain," the brokerage said.

    ICICI Securities maintained its earnings estimates, modelling revenue / EBITDA / PAT CAGRs at 20% / 21% / 24% over FY22-FY24E. It maintained a Buy rating with a DCF-based target price of Rs 630.

    Key downside risks are raw material costs turning inflationary and an increase in competitive intensity.

    (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)



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