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‘Family-size’ Offering

Jubilant FoodWorks, the master franchisee of Dominos, should be on your watchlist. Find out why…

Most of us have had Dominos pizza or at least have heard about the brand but very few amongst us know that it’s owned by a listed firm: Jubilant FoodWorks Limited (JFL). JFL is the master franchisee of Dominos Pizza Overseas Franchising, Netherland; for India, Nepal, Bangladesh and Sri Lanka. The company has been the franchisee of Dominos in India for the last 15 years, and post the recent renewal it would continue to be so for another term of 15 years (with an option to extend it for another 10 years). Dominos has maintained its market leadership in the organised pizza market with 54 per cent market share and 70 per cent share in the pizza home delivery segment in India; thanks to its differentiated model and positioning as ‘Khushiyon ki home delivery’ and ‘Delivery within 30 minutes or free’. As on December 31, 2011, the company was operating 439 stores in 100 cities across the country.

There are three key growth drivers for the company: adding new stores in Sri Lanka, Nepal, Bangladesh; expanding into Tier II and Tier III cities of India; increasing same-store-sales (SSS) by making new additions to the menu thereby raising average bill size; and rolling out stores in India under the exclusive franchisee of Dunkin Donuts, the world’s largest baked goods and coffee chain, franchisee of which it recently bagged. All these growth drivers have been moving in the right direction with new stores being added, offerings like Choco Lava cake, Pasta etc raising the average bill and first Dunkin’ Donuts store rolling out in New Delhi last month.

Have a look at the shareholding pattern and you would notice that FIIs fancy this stock and for the same reason the valuations have streched this high. In the previous five years, though the sales have grown at a CAGR of 48 per cent, earnings per share have clocked a CAGR of a whooping 126 per cent making it one of the fastest growing consumer food businesses in the South Asia; riding on ‘the rise of the middle class’ story of India. For those who subscribed to its IPO in Feb, 2010, at `145 a piece, it has already been an eight-bagger; however at the current PE of 71, the valuations look streched. Add it to your watchlist and keep an eye for correction in prices to build a long position in this scrip.