Jubilant Foodworks Q2 results

Jubilant Foodworks Shares Jump 8% Post Q2 Results – Here’s Why Despite a PAT Decline

Jubilant Foodworks, the operator of well-known fast-food chains like Domino’s Pizza and Dunkin’ in India, experienced an 8% rise in share price after announcing its Q2 FY25 results, despite a decline in profit after tax (PAT). Below is a detailed analysis of the key financial metrics, reasons for the stock surge, and an evaluation of the results.

Key Highlights of Q2 FY25 Results

Profit After Tax (PAT): Jubilant Foodworks reported a consolidated net profit of ₹66.53 crore in Q2, a drop from ₹97.2 crore in the same period the previous year. This decline is attributed to increased costs, including operational expenses and expansion efforts.
Revenue Growth: Revenue from operations surged to ₹1,954.72 crore, a significant increase from ₹1,368.63 crore in the same period last year, showing growth driven by the expansion of operations and market presence.
Total Expenses: The company’s total expenses rose to ₹1,895.67 crore, up from ₹1,290.17 crore in the year-ago quarter, reflecting increased spending on operational and expansion activities.

Domestic and International Segment Updates

India Segment

Revenue: The revenue from the Indian operations grew to ₹1,466.9 crore, marking a 9.1% increase, largely driven by an 8.1% growth in Domino’s India sales. “Like-for-like” (LFL) retail sales growth reached 2.8%, with Domino’s delivery growth achieving an impressive 11.4%.
EBITDA and PAT: EBITDA for the quarter was ₹284.2 crore, with an EBITDA margin of 19.4%. The PAT stood at ₹52.1 crore, giving a PAT margin of 3.5%.
Store Expansion: Jubilant Foodworks expanded its network with the addition of 51 new stores in India, taking the total count to 2,199 stores.

International Segment

Turkey, Azerbaijan, and Georgia: DP Eurasia, Jubilant’s subsidiary operating in these regions, saw system sales of ₹771.9 crore, with revenue from operations at ₹460.5 crore. The EBITDA margin was a healthy 26.1%, and PAT margin stood at 10.5%.
Bangladesh: Revenue from Domino’s in Bangladesh dropped by 5.3% to ₹12.6 crore due to temporary store closures amid challenging operating conditions. The stores have since reopened.
Sri Lanka: Revenue rose significantly by 33.6% to ₹17 crore. This growth is attributed to strategic store relocations, new product launches, and initiatives tailored to local preferences.
Store Expansion in International Markets: A net of 22 new stores was added across international markets, ending the quarter with 931 stores.

Reasons Behind the Share Price Surge

Revenue Growth and Market Expansion: Despite a fall in PAT, the company’s robust revenue growth and aggressive store expansion indicate its strengthening market position, which investors view positively.
Acquisition of DP Eurasia: The acquisition of a controlling stake in DP Eurasia has enhanced Jubilant’s global presence, especially in Turkey, Azerbaijan, and Georgia, which contributed positively to revenue growth and profitability.
Positive Operating Profit Trajectory: The addition of stores and increased operating profit in key markets reflects Jubilant’s effective strategy and operational efficiency, signaling potential long-term growth.
Investor Confidence: Jubilant Foodworks’ continued innovation, expansion, and ability to capture consumer demand in both domestic and international markets have increased investor confidence, resulting in an 8% increase in stock price.

Advantages and Disadvantages of Jubilant Foodworks’ Q2 Results

Advantages

Revenue Growth: A substantial increase in revenue reflects strong market demand and successful expansion strategies.
Increased Market Footprint: With over 3,130 stores worldwide, Jubilant Foodworks has solidified its position as a leading player in the fast-food sector.
Diversified Portfolio: The acquisition of DP Eurasia has diversified its portfolio and geographic reach, which helps mitigate risks tied to any single market.
Operational Efficiency: High EBITDA margins, especially in international markets, indicate efficient operations and potential profitability.

Disadvantages

Decline in PAT: The drop in profit after tax could concern investors looking for consistent profit growth.
Increased Expenses: Higher operational costs, partly due to expansion, may affect short-term profitability.
Challenges in Bangladesh: Temporary closures and declining revenue in Bangladesh highlight challenges in maintaining consistent growth in all markets.
Dependency on Key Markets: While diversification is beneficial, the company’s performance still heavily relies on the Indian market, which could be a vulnerability if domestic growth slows.

Conclusion

Jubilant Foodworks’ Q2 results demonstrate a strong growth trajectory, underpinned by revenue growth, strategic acquisitions, and market expansion. The increase in stock price indicates that investors are optimistic about the company’s long-term growth potential, despite the dip in PAT. Jubilant’s focus on expanding both its domestic and international footprint, combined with a commitment to operational efficiency, positions it well for future growth. However, addressing profitability challenges and managing costs will be essential for sustaining investor confidence.

FAQs

Why did Jubilant Foodworks’ stock price increase despite a drop in PAT?

The increase in stock price is attributed to the strong revenue growth, successful acquisition of DP Eurasia, and aggressive expansion efforts, which are viewed as signs of long-term growth potential.

How did DP Eurasia’s acquisition impact Jubilant Foodworks’ financial results?

DP Eurasia’s acquisition contributed positively to Jubilant’s revenue growth and operating profit, especially in Turkey, Azerbaijan, and Georgia. The acquisition diversified Jubilant’s portfolio and increased its international presence.

What are the main challenges Jubilant Foodworks faced in Q2 FY25?

The main challenges include increased operational expenses, a decline in PAT, and temporary closures in Bangladesh, impacting revenue in that market.

How did Domino’s India perform during the quarter?

Domino’s India reported an 8.1% growth in revenue, with Like-for-Like (LFL) delivery sales increasing by 11.4%, reflecting strong demand and effective delivery operations.