Domino’s Pizza franchisee Jubilant FoodWorks Q2 profit up 58% but stock tanks

Jubilant FoodWorks Ltd, the Indian franchisee of pizza chain Domino’s and the most valued restaurant chain in the country, came up with strong earnings as well as revenue growth numbers for the second quarter but still saw investors dump its shares on Wednesday.

The company’s stock price crashed 8.6% and was quoting at Rs 3,962.5 apiece just before market close on the BSE after results were declared.

Jubilant FoodWorks reported a consolidated net profit of Rs 119.8 crore for the three months ended September 30. This is up 58% than a year earlier and 73% higher on a sequential basis.

Consolidated revenue shot up 36.7% to Rs 1,116.2 crore from Rs 816.3 crore in the same period last year. On a sequential basis, revenue rose 25%.

Jubilant FoodWorks: Other key highlights

1) EBITDA margin in Q2 declined to 25.8% from 26.5% in the second quarter of last year.

2) Margin shrank due to 40% increase in cost of raw materials and 51% jump in manufacturing expenses.

3) Same-store sales growth (SSSG) was 26.3% in Q2. This compares with a 20% decline in the same quarter last year but probably wasn’t enough for the investors.

4) Jubilant opened a record number of new stores—60—during the quarter.

5) The company opened 55 stores of Domino’s, two stores each for Dunkin’ Donuts and Hong’s Kitchen, and one store of Ekdum.

6) Sri Lanka and Bangladesh registered sales growth of 88.4% and 33.2%, respectively.

7) In Sri Lanka, the company achieved record sales. It opened three new Domino’s stores, taking the total to 31.

Jubilant FoodWorks management commentary

Jubilant chairman Shyam S. Bhartia and co-chairman Hari S. Bhartia said that the second quarter saw a strong all-round performance with revenue, profitability and store growth numbers hitting record highs.

“The new investments announced during the quarter will help steer the company towards its goal of becoming a multi-brand, multi-country business driven by technology and will create significant value for all stakeholders,” they said.

Pratik Pota, CEO at Jubilant Foodworks, said that the company delivered a robust top-line growth, strong EBITDA margins and record new store openings notwithstanding the operating challenges and inflationary headwinds.