1/N
Indian Investors have converted this famous WB quote to buy “quality” at any price! IMHO this is one of the costliest incidences of Chinese whisper!!!!!
However today I look at #Jubilant FoodWorks which appears to be a fair company at absurd valuations
Indian Investors have converted this famous WB quote to buy “quality” at any price! IMHO this is one of the costliest incidences of Chinese whisper!!!!!
However today I look at #Jubilant FoodWorks which appears to be a fair company at absurd valuations
2/N
My observations basis limited history of 10 yrs
Positives
•Remarkable past execution (30 mins delivery)
•Excellent historical growth
•Great Return Ratios (ROCE, ROE)
•Reasonable growth expectations going forward
My observations basis limited history of 10 yrs
Positives
•Remarkable past execution (30 mins delivery)
•Excellent historical growth
•Great Return Ratios (ROCE, ROE)
•Reasonable growth expectations going forward
3/N
Negative
•Doesn’t own the brand!! (Risk of dispute not factored)
•Questionable Promoters (Tried to extract a royalty for using the “Jubilant” brand. This for a co. which pays royalty to use #Dominos brand!!)
•Growth Slowdown (from ~40% to ~15%)
•Decline in return ratios
Negative
•Doesn’t own the brand!! (Risk of dispute not factored)
•Questionable Promoters (Tried to extract a royalty for using the “Jubilant” brand. This for a co. which pays royalty to use #Dominos brand!!)
•Growth Slowdown (from ~40% to ~15%)
•Decline in return ratios
4/N
Disruption Risk- Earlier hardly any restaurants delivered. However post swiggy and Uber Eats the biggest USP for Jubilant is challenged
Constant Promoters selling– From 61% in Sept’10 to 57% Sept’12 to 50% in Sept’14 to 45% in Sept’16 to 42% in Mar’20 (Makes you wonder)
Disruption Risk- Earlier hardly any restaurants delivered. However post swiggy and Uber Eats the biggest USP for Jubilant is challenged
Constant Promoters selling– From 61% in Sept’10 to 57% Sept’12 to 50% in Sept’14 to 45% in Sept’16 to 42% in Mar’20 (Makes you wonder)
5/N
Scenario analysis, assuming they manage to deliver 12-18% earnings growth over the next 10 years over 2019 NP (Peak Margins) assuming 1800/- as entry price
Scenario analysis, assuming they manage to deliver 12-18% earnings growth over the next 10 years over 2019 NP (Peak Margins) assuming 1800/- as entry price
Conclusion
For a co. with no brand ownership, questionable management, <20% growth, 8-12% expected IRR over the next 10 yrs in the best case, investors are willing to pay ~60x FY22.
Highly unfavourable Risk Reward!!
It needs to fall at least 40% to merit a 2nd look.
For a co. with no brand ownership, questionable management, <20% growth, 8-12% expected IRR over the next 10 yrs in the best case, investors are willing to pay ~60x FY22.
Highly unfavourable Risk Reward!!
It needs to fall at least 40% to merit a 2nd look.
