Shares of Jubilant FoodWorks, the operator of Dominos India, were dropping on Thursday after the firm’s poor showing in the fourth quarter led to brokerage downgrades.

What Happened: For the March quarter, Jubilant FoodWorks posted a consolidated net profit of ₹208.24 crore, significantly higher than the ₹28.5 crore recorded in the same quarter the previous year, bolstered by an exceptional gain of ₹170 crore.

The company’s revenue climbed 23.8% to ₹1,572.7 crore from ₹1,269.8 crore year-on-year. However, the EBITDA margin saw a decline of 210 basis points, landing at 6.9%.

Notably, Domino's Pizza reported a slight like-for-like (LFL) growth of 0.1% for the March quarter, marking a return to positive territory after four quarters of decline.

Analyst Views: Nuvama Institutional Equities remarked that an improvement in same-store sales growth is critical for enhancing Jubilant’s valuations — a goal that remains elusive.

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Despite implementing several strategic measures, such as loyalty programs, reduced delivery times, a brand overhaul and enhancements in delivery and order growth, Nuvama deemed these steps insufficient. The brokerage maintained a “hold” rating on the stock, lowering its target price from ₹498 to ₹487 per share.

HDFC Securities also maintained its “reduce” rating for the stock cutting the target price to ₹460 from ₹500. The brokerage said that the company’s March quarter results were lower than its estimates. The analysts also highlighted that the company’s valuation is expensive currently.

Morgan Stanley also kept its “equal-weight” rating, adjusting its target price downward to ₹427 per share due to weaker-than-expected earnings and margins in Q4. This target suggests an approximate 11% downside to current levels. The brokerage highlighted that the current operating deleverage cycle has led to substantial estimate cuts, with better underlying demand being essential for any further recovery.

Jefferies, an international brokerage, similarly reduced its target price for Jubilant FoodWorks to ₹475 per share with a “hold” rating, attributing the change to declining margins reaching multi-quarter lows.

Meanwhile, Macquarie gave the stock an “underperform” rating with a price target of ₹300 on the back of positive growth for non-split same-store sales that continued in April, making the firm confident on a sales and EBITDA margin recovery from fourth-quarter lows. It also said that peers do not share such confidence in growth

Price Action: Jubilant FoodWorks’ share price gave up early gains to trade 0.7% lower at ₹476.20 in the morning session on Thursday.

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