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With the consistent selling in the broader markets from December last year, many stocks have changed their trajectory toward the south. Some of these quality stocks have now become highly oversold, making them worth a look for long-term investors.
One such stock from the QSR (quick service restaurants) space is Jubilant Foodworks (NS:), the master franchise rights holder for three international brands in India – Domino’s Pizza, Dunkin’ Donuts and Popeyes®. Its foray into the Chinese cuisine segment with its home-grown brand – Hong’s Kitchen is also a star for its wide portfolio of restaurants. Its other brands such as ChefBoss which offers ready-to-cook meals and Ekdum! which offers the widest range of Biryanis also add to the revenue stream.
The company has a market capitalization of INR 32,070 crores and after falling around 37.6% in the last one year, the stock is trading at a good valuation with a P/E ratio of 76.53. This might seem on the higher side, however, when comparing it with the sectoral average of 139.5, Jubilant Foodworks seems to be present at a yummilicious valuation.
FY22 turned out to be the best year for the company so far as it clocked the highest-ever revenue of INR 4,437.47 crores, translating into a record-high net income of 420.38 cores and it has been consistently profitable for many years. It has also been able to grow its market share to 32.77% in the last five years.
Most of the peers that aren’t even profitable are – Westlife Foodworld Ltd (BO:), the franchise owner of McDonald’s (NYSE:) which is running into losses for the last three fiscal years, Restaurant Brands Asia Ltd (NS:), which runs Burger King outlets in India is yet to post a profitable year, since FY14, at least etc. In fact, Barbeque-Nation Hospitality Ltd (NS:) which is a very popular restaurant chain, especially amongst non-vegetarians posted its last annual profit year in FY17.
Mutual funds are also taking note of very few investible opportunities in this space leading them to ramp up their stake in the company in every single quarter since the last many, currently having a 13.82% interest.
As the stock is down over 37% in the last one year, the current dip should definitely be evaluated by value seekers. Secondly, the RSI (daily,14) also showed a near-oversold reading of 30.3 in the last session as the stock fell to the lowest level in 7 months. Even a small bounce-back can propel the stock to INR 535 from the CMP of INR 490, as of 10:10 AM IST.
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