The two stocks recommended by SMC Global Securities’ Research Team this week are Jubilant FoodWorks and Krsnaa Diagnostics. These two stocks have shown great potential with positive financial estimates for the next two financial years. So, let’s go through the details of the two stock recommendations for the period between October 28, 2024 and November 1, 2024.
Jubilant FoodWorks Limited
Its CMP was ₹583.70 (as on October 25, 2024) and its target price is set at ₹756 with an upside potential of 30%.
Investment Rationale
- Jubilant FoodWorks Limited holds the exclusive master franchise rights from Domino’s Pizza Inc. In India, it has an extensive network of 1,995 Domino’s stores across 421 cities. It also has exclusive rights to develop and operate Popeyes restaurants in India, Bangladesh, Nepal and Bhutan, and Dunkin’ restaurants in India. It operates 42 Popeyes restaurants in 15 cities and 31 Dunkin’ restaurants across 10 cities. ‘Hong’s Kitchen’ is the first owned restaurant brand of the Company operating in the Chinese cuisine segment which now has 28 restaurants across 6 cities. In Turkey, Azerbaijan, and Georgia, it has 720 stores wherein 89% are franchised stores. In Sri Lanka and Bangladesh, it operates through its 100% owned subsidiary which currently has 50 and 28 stores respectively.
- In India, it increased the pace of new product introduction to drive in-store growth during lunch hours by introducing the ‘best value’ that a QSR chain offers i.e a Lunch Thali, a four-course meal at Rs. 99. To improve attachment of beverages, it launched a range of Chillrz. For customers looking for indulgence, it launched the globally acclaimed Domino’s Cheese Volcano pizza range meant for cheese lovers, creating excitement in the category.
- In Q1FY2025, Consolidated Revenue came in at ₹1933.1 crore, up by 44.8% YoY. EBITDA margin was at 19.8% and EBITDA growth was 39.9% YoY at ₹383.1 crore. Net profit was up by 110.3% to ₹60.8 crore.
- In Turkey, it added 4 and 8 stores in two brands Domino’s and COFFY respectively which the company operates. With this, the total store network increased to 707 and 105 respectively. The 88% of the Turkey store network is franchisee-operated, which makes the model asset-lite.
- Popeyes has crossed the 50-store milestone and is now serving guests across 21 cities. As a significant move, it launched Popeyes Baskets in this business segment. It continues to remain bullish on store expansion, customer feedback, sales, and margin improvement of the business.
- In Dunkin’, it added five net stores. The launch of Bubble Teas in Q1FY2025 helped enhance the beverage mix and dialing up occasion-led shares through Doughnuts is helping to improve Dunkin’s performance and its path towards positive restaurant profitability.
- In Hong’s Kitchen, it added five new stores taking its network to 33 stores now. The successful Hong Kong Wrap range was further bolstered with the introduction of three new wraps. The range now starts at Rs. 99.
Promoter shareholding is highest in Jubilant FoodWorks at 41.94%.
Valuation
The company is making progress in driving growth across brands and geographies and is equally focused on driving margin expansion in India. According to the management, going forward, margins are expected to improve from the lows of Q4-2024. Network expansion and new launches to drive business growth. Thus, it is expected that the stock will see a price target of ₹756 in an 8 to 10-month time frame on a three-year average P/BV of 18.43x and FY26 BVPS of ₹41.01.
Risk
- Economic Slowdown
- Regulatory Risk
Krsnaa Diagnostics Limited
Krsnaa Diagnostics’s CMP was ₹790 (as on October 25, 2024) and its target price is set at ₹892 with an upside potential of 13%.
Investment Rationale
- Krsnaa Diagnostics is a differentiated diagnostic service provider in India. It provides a range of technology-enabled diagnostic services such as imaging (including radiology), pathology/clinical laboratory, and teleradiology services to public and private hospitals, medical colleges, and community health centers across India.
- Currently, Krsnaa Diagnostics is well-equipped to deploy 28 CT scan machines, and 24 MRI machines, establish 153 labs, and set up 2,291 collection centers, all under various contractual agreements. The recent contract wins highlight the exceptional capabilities of our in-house teams.
- The company’s consolidated net profit surged 22.4% to ₹17.92 crore in Q1FY25 as against ₹14.64 crore posted in Q1 FY24. Revenue from operations jumped by 22% year-on-year (YoY) to ₹170.23 crore in the quarter ended 30 June 2024.
- The company has an extensive network of integrated diagnostic centres across India primarily in non-metro and lower-tier cities and towns. On the development front, it has bagged the contract for Tele-Radiology from BARC and has signed an agreement for 5 MRIs to be installed in 5 districts of Madhya Pradesh.
- Further, it has launched Krsnaa Retail Pvt. Ltd to focus on increasing its retail presence beginning with 5 states i.e. Maharashtra, Punjab, Odisha, Assam & Himachal Pradesh, and also expand its presence by establishing 395 new centers across the nation.
- Recently, the company joined hands with Apulki Healthcare for cancer and cardiac care, and as per the terms of the contract, the company will become the exclusive diagnostics partner for Apulki’s cancer and cardiac hospitals for the next 30-plus years.
In the overall shareholding of Krsnaa Diagnostics, promoters have a shareholding of 27.17%.
Valuation
The management aims to expand the company’s network of diagnostic centers across India. By leveraging its experience in operating such centers, the company seeks to establish a presence in all states. The company sees significant potential for public-private partnerships (PPPs) in India’s rural areas, where diagnostic services are underpenetrated. In these partnerships, government contributions can range from providing land or capital to offering financial incentives. Companies with strong track records and competitive pricing such as Krsnaa Diagnostics, are likely to secure such PPP contracts. Going forward, the growth drivers for the diagnostics industry will be driven by rising income levels, Increasing health awareness, and increased government focus on healthcare. Thus, it is expected that the stock will see a price target of ₹892 in an 8 to 10-month time frame on an expected P/Bv of 2.80x and FY26E BV of ₹318.65.
Risk
- Regulatory and technology risk
- Competitive risk
Conclusion
These two stocks, Jubilant FoodWorks and Krsnaa Diagnostics, one from the restaurants sector and the other from the diagnostic service sector can reach their target price in the coming 8 to 10 months. But it is always better if you do your analysis before investing and set a stop loss target. To keep track of your invested stocks, open demat account with SMC Global Securities and invest on the go.
Reference:
https://www.smctradeonline.com/research/wise-money/241
Author: All Content is verified by SMC Global Securities.
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