Analysts Corner: Jubilant Foodworks Now Looking Beyond Domino

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Beyond Domino’s: Over the past decade, JUBI has focused primarily on Domino’s and efforts have been made to expand Dunkin ‘which has had limited success.

Recent quarters have seen a series of initiatives beyond “Domino’s” including FMCG, Biryani, Hong’s Kitchen and a 10.8% stake in Barbeque Nation. JUBI has now taken a 32.8% stake in DP Eurasia, which is present in Turkey and Russia, among others, at an attractive valuation. Although this raises concerns (volatility, bandwidth, etc.) the investment is low at Rs 250 crore and although it is the largest shareholder there will be no line by line consolidation.

Beyond Domino’s: Over the past decade, JUBI has focused primarily on Domino’s and efforts have been made to expand Dunkin ‘which has had limited success. In 2019, JUBI made a foray into Chinese through its own brand Hong’s Kitchen, which currently has 10 stores. During last year’s lockdown, JUBI also expanded into FMCG with a line of ready-to-cook products and plans are underway to expand into ready-to-eat as well. In 2020, JUBI also made a foray into Biryani under its own brand, Ekdum !. The company also took a 10.8% stake in Barbeque Nation for `0.9 billion although this is purely a financial investment, by direction.

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DPE Agreement: JUBI has now acquired a 32.8% stake in DP Eurasia (DPE) for £ 24.8 million from Turkish Private Equity Fund II LP. DPE is listed on the London Stock Exchange and, based on Bloomberg’s estimates, the transaction’s valuations are approximately <8x EV / Ebitda and <1x EV / Sales, a significant discount to JUBI's own valuations.

DPE is the exclusive master franchisee of the Domino’s Pizza brand in Turkey, Russia, Azerbaijan and Georgia. It has a network of 771 stores, most of which are in Turkey (568) and Russia (190). The majority of DPE stores are sub-franchise stores (550/771), while the remaining 221 are company-operated.

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JUBI’s participation makes it the company’s main shareholder; despite this, the company would not consolidate the target asset line by line. A comparison between JUBI FY20 and DPE 2019. JUBI’s Domino stores are 74% higher than total DPE stores, although JUBI stores are 5.5 times clean DPE stores. JUBI’s revenue is almost double that of DPE’s – the former saw revenue growth of 8% CAGR compared to the latter’s 4% in Indian Rupees over 2014-20.

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