Business, Companies, Jubilant FoodWorks

Jubilant FoodWorks added 29 stores last quarter – 20 new outlets for Domino’s Pizza and three stores each for its other brands Dunkin Donuts, Ekdum! and Hong’s Kitchen.

Jubilant FoodWorks, the operator of Domino’s Pizza and Dunkin’ Donuts in India, aims to “transform itself into a food-tech powerhouse” after reporting a robust recovery from the impact of the second wave of the COVID-19 pandemic.

The company is undergoing a digital transformation with an eye on capturing the “likely high growth in deliveries and takeaways.”

“We intend to use technology at the heart of everything we do and use it to completely transform and revamp our customer experience, employee experience, and to drive operational efficiencies,” Pratik Pota, CEO and wholetime director of Jubilant FoodWorks, said on an investor call after reporting its first-quarter results.

Jubilant FoodWorks’ digital focus comes as massive investments pour into the food-tech segment. Last week, restaurant aggregator and food delivery company Zomato concluded a $1.26 billion initial public offering, while rival Swiggy raised $1.25 billion from SoftBank and Prosus earlier this week.

Flush with funds, these companies are expected to push deliveries aggressively and tap the changing consumer behaviour in the wake of the pandemic.

Domino’s Pizza already draws a major share of its delivery orders through its app, unlike other quick service restaurants and eateries. It had 64 million app downloads in the first quarter of FY22. According to the company, the growth on its own app continued to outpace sales on aggregator platforms such as Swiggy and Zomato in Q1.

Super app ambitions?

Jubilant FoodWorks is taking initiatives to tap digital better, right from building a strong digital team and a data science team to opening more stores focussed on deliveries and takeaways.

“We have built a large digital team and we are strengthening it even further, both in product and user experience and in technology and engineering. We are also building a strong digital data science team,” Pota said. “We also intend to invest in growing our machine learning and artificial intelligence capabilities.”

The company plans to open 150-175 stores in this financial year, a majority of which will be equipped only for deliveries and takeaways.

“We will open a few full-service stores in small towns,” said Pota.

Most of the new stores will be for Domino’s Pizza. However, it will also scale up the online presence of its other brands. According to the company, it will open shared stores between Dunkin’ Donuts, Ekdum! and Hong’s Kitchen – focused on deliveries.

Dunkin’ Donuts, which traditionally has been heavy on dining, will now tap deliveries actively.

The company has also indicated that while it may be too early, it might look at launching a super app combining its different brands.

Edge over competition

Jubilant FoodWorks is unfazed by the massive investments raised by Zomato and Swiggy.

“We went through intense competitive activity in 2018-2019 with aggregators resorting to aggressive discounting to grow their size and orders. Despite that aggressive competitive context for the two years, JFL emerged stronger, with a higher market share for Domino’s,” said Pota.

According to Pota, such investments will help expand the category.

Analysts, too, said the company has an advantage over food-tech players.

“These welcome initiatives are strengthening Jubilant FoodWorks’ right-to-win in a rapidly expanding QSR market – wherein the post-pandemic medium-to-long-term opportunity is looking significantly superior to pre-pandemic levels,” Motilal Oswal Financial Services said in a note.

According to the brokerage, the company’s delivery and technology moat give it a sharper edge over QSR peers and aggregators.

“It is already the most efficient on sales per sq. ft. basis, leading to best-of-breed profitability as well as the best balance sheet metrics among peers,” it added.

Motilal Oswal upgraded its rating of the company’s stock to a ‘buy’ with a target price of Rs 3,630.

Recovery on track

Jubilant FoodWorks reported a net profit of Rs 63 crore in the first quarter, beating analyst expectations, compared with a net loss of Rs 74 crore a year earlier. Revenue from operations more than doubled to Rs 879 crore from Rs 388 crore a year ago.

The company had reported a profit of Rs 71.48 crore and revenue of Rs 949 crore in the first quarter of FY20, before the COVID-19 outbreak, according to its BSE filing.

The growth in deliveries during the second wave of the pandemic helped offset the decline in dine-in. Jubilant FoodWorks’ delivery channel grew 124 percent in the quarter ended June 2021.

“The stock is trading at rich valuations of 64x FY23 and 51x FY24 earnings but is developing into a solid 2-3-year growth story,” Yes Securities said in a note. “We expect the rich valuations to sustain given increasing aggression on footprint expansion and technology advancement, multiple levers to protect margins despite competition and strong long-term growth potential with entry into multiple new brands and geographies.”

The Jubilant FoodWorks share price hit a 52-week high of Rs 3,449.90 on the back of its strong first-quarter results on July 22.


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