Did you find any logical answer to this from anyone?
No, not really. I thought he has done quite well and was a favorite of institutional investors.
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So on screener d/e shown is 1, while on actual balance sheet i found mismatch!
Do they actually have a debt to equity ratio of 1 ? Did they actually went from debt free to huge debt in fy 2021?
The proposed acquisition of additional 39% stake in JGHL from Golden
Harvest QSR Limited (‘seller’) is now likely to be completed by April 27, 2022 as agreed with the
seller.
I have seen this brand at many places at least in Bangalore. The product packaging gives a premium feel and is good quality. Although it’s slightly expensive than other similar brands.
This is the acquisition of the Bangladesh JV which was originally 50% subsidiary but now increased.
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Oh, my bad. I mixed the two names , there is a grocery brand known as "Golden Harvest’ too. Thanks for clearing up.
Stock split approved 1:5 ratio
Rationale: To enhance the liquidity of the Company’s equity shares and encourage the participation of small investors by making it more affordable. Any standard policies/ guidelines that get taken into consideration for split scenarios ? 
If FED policies are going to impact indian markets, can we see FII shareholding going down by 3-5% similar to pre covid levels. That implies much more downside to current price even after recent corrections.
Personally I have developed a little dislike for the management. They were persistent on not sharing SSG growth. Even if the differences b/w LFL and SSG were marginal( mgmt say so, not me), they should share those details as they have been. Investors can take their own calls which is a better indicator.
While Sona comstar mgmt seems to be literally gold, they seem to be several milestones ahead of dominos mgmt at least.
Disc: Not invested and watching mgmt actions carefully.
Today’s result seems to be good. But the stock went down 4%. Any reason ?
Jubilant Foodworks launched its first store of Popeyes in Bangalore on Jan 19th, there was an insane amount of fan fare irrespective of Covid on the launch day.
Two other stores were opened in the next 2-3 weeks.
Did some scuttlebutt and ordered several times from all the 3 stores over the past 3 weeks, here are my observations when compared to KFC.
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The Popeyes app for delivery/pickup was launched on the first day. I must say Jubilant has hit the product out of the park, the app is well designed, very fluid to use and has an excellent customer support. KFC and even McDonalds are a generation behind.
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Couldn’t experience the delivery service because I don’t think they deliver 2.5km outside the store radius, have always had my order picked up via Dunzo or Swiggy. Every time the order was ready to be picked up within 5 minutes of placing it inspite of ordering during peak time, all the updates can be tracked on the app and the store executive calls to inform the same as well.
None of the orders from KFC placed from their app or Swiggy were ready to be picked up in 5 minutes.
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Coming to the taste, I genuinely found the chicken at Popeyes to be more flavourful and juicer than KFC. Their best sellers which include Burger, Wings, Popcorn, Crispy Chicken and fries are all priced similar to KFC.
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But, the chicken sandwich/ burger (₹179) is a clear winner here, have to be one of the best burgers I have had. This is the same item that got sold out in the USA within 2 weeks after its launch in August 2019 and thanks to this, Popeyes is making $400K more per restaurant now.
It was a clever move by Jubilant Foodworks to launch 3 restaurants first in Bangalore because it has one of the largest number of early adopters and the feedback would prove to be a gold mine before pan India expansion.
Overall, I believe Popeyes will be a huge hit among the masses and an another cash cow for Jubilant, after Dominos.
Disclosure: Tracking Position.
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CEO is leaving. Does this add to the volatility of the stock price?
How will it impact the company overall?
Just by looking at his past Ventures he did well there and also after he left he created a great impact afterwards.
Other points is will Jubliant make new person to the environment or will promote that will define the future outlook.
As if management person is taken then not much changes atleast in the whole running and not very high chopping and changes will not be done.
Personally see that the Domino’s hyper growth opportunities might be in the later stages so the high growth can only be done by Dunkin,own brands or Popeyes or even some other countries.
There is still a great qsr opportunity left like more premium option but very little more stores be there growth atleast in relative term due to higher base.
If we look at his management he clearly focused on downward end but now with increasing per capita and changing taste it might not be the best strategy so new management can look toward it.
Will look for ceo letter in this year annual letter to judge what they will be focusing on as he will leave in June 15 so might be there be no response in q1 fy23.
So next 2-3 results will be the major point to see how new management will play out.
Also if we there are no more step down happen or not is yet to be seen
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Pota is not joining a certain competitor which is 1 less negative thing to address. Usually, they have a non-compete even at non-management levels. So, that gets semi-confirmed today.
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There were clear signs that things were not going well for Jubilant.
In the recent Q3 FY22 concall, the management received a lot of flak for doing away with SSGR reporting. It is obvious the numbers would be bad. I have never seen Pota so much on the defensive as in the latest analyst call.
Besides that, as an investor I have many other concerns. The company has been too slow in scaling up Hong’s Kitchen, for example. The Chinese food foray was announced in March 2019. Even considering that a few quarters were lost in Covid, it is disappointing that Hong’s Kitchen is yet to step out of the Delhi – NCR region. It is not clear how Chef Boss is doing, and what the company plans to do with it. We have no idea how Ekdum! has done either, which is also more than a year old now. The company’s disclosures have been lacking on many fronts.
Operationally as well, things appear to have gone downhill for Jubilant, as my recent order of a Domino’s Pizza showed. The company goofed up in delivery and it took multiple phone calls, service complaints and a severe dressing down to the customer service staff to resolve the matter a full 24 hours later. In the conference calls of course, Pota has claimed that company’s NPS scores “are strong and trending up” but again, we are not privy the actual details.
Though Pota has often been credited with turning around the company from what it was five years back, earlier last year I was surprised to see almost one-fourth of the institutional investors voting against his re-appointment. (See here)
Having said this, my concerns on company’s capital allocation remain, and this might have been another flashpoint between Pota and the Promoters. In various conference calls, Pota has given enough hints that he disowned some of company’s diversifications. For example, in the first concall after Jubilant announced its investment in Barbeque Nation, Pota made just one feeble attempt to explain the decision and then distanced himself from the same.
Even on questions about DP Eurasia investment, Pota has generally avoided defending the decision and letting Mr. Bhartia take ownership. See the questions by Vivek Maheshwari of Jefferies on how much overseas capital allocation the company would do (click here), Pota just says that nothing we do will lead us to underinvesting in Domino’s business in India, and then lets Mr. Bhartia answer the actual question. Investors are unhappy with these diversifications, and I had expressed some of my own concerns here. With the recent outbreak of war, these are clearly playing out now.
So to summarize, neither Pota nor the Promoters seem to be on a honeymoon currently. A course correction is very much in order, and Pota’s departure could trigger some of that. While Pota is seen to have done a good job, his successor may not necessarily do any worse. Only time will tell.
(Disc: Invested)
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All the points that even I was Little bit concerned and the concalls point was very nice i totally ignored this part.
Seeing this pota was actually making buisness very sluggish as we have seen in pota management they actually de scaled the Dunkin buisness and it helped but as now Domino’s is full grown and is actually a high cashflow making entity his focus and growth on other might not be that good and that was also a reason for recent growth slowing down.
I personally was seeing and even in my own views other can only make this growth story to sustain we need to grow other franchise also that may hurt the margin but will surely be more easy to grow and also have much higher potential then already established buisness that is still growing but only at 10-12% and not it’s earlier 18-20% growth rate.
Even we account for covid still 8-9% sales growth show this only and 17% in 10y show that this is a growing but a slowing buisness.
Let’s see I am personally looking at the next quater results that will be coming in 1-2 months of time.
Will judge to trip or expand my position looking at that only.
Disc: invested
The Popeyes expansion is something I am looking forward to . If that can kick off in the way Burger King did on a longer term 5 year perspective it can really be a really good bet by Jubliant .
The reasoning behind it is pretty simple .
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KFC in India is hit and miss . I have had a simply memorable KFC experience in their Powai Mumbai branch which makes me crave for KFC whereas I have refried and somewhat chicken gone bad KFC experiences from some other Mumbai outlets. What KFC lacks is consistency and purely because of this I prefer ordering a burger king or McDonald’s which tend to have pretty stable standardized experiences across their outlets.
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KFC menu churning and sudden dropping of their options ( I last heard Crushers are gone too ) . Too less options for veg
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Yumm brands seems not so focussed in India . In Taco Bell they had one of the greatest opportunities as Mexican food is kind off similar to Indian .It could have been a huge phenomenon if tweaked correctly for Indian tastes but they have again failed . I once saw a KFC video of Pakistan and its food as well as store looks way better than in India ( this is just to mention how poor KFC has been in India )
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Popoyes is pitching its burger as its bestseller vis a vis the buckets which KFC sells as their bestsellers . Open its app as well and the first thing they sell as bestseller is their burger. I read somewhere that Pizzas and Burgers are the two most profitable products from margin perspective . And if u read the classic popeye burger especially the brioche bun has already become the talk of the town in bangalore . If u see some of YouTube and Google reviews most people are liking the quality of the bun .( Mcd Bk beware )
If Popeyes can expand and deliver the same standardized experiences in India like McD and BK then I think on a longer run Jubliant Foodworks can have 2 cylinders firing for itself . What burger king has done is commendable but a blow out punch to KFC is much more easier .
Dunkin Donuts i had seen way back if i recollect around 2014 2015 in Andheri and the reason it failed is because of how lavish the Stores was even considering todays time . They tried to emulate a Starbucks maybe and it has failed miserably . I do not count it to be a growth trigger even in the next 5 years unless there is some real change in consumer preferences which i dont think will happen anytime soon .
Threats seems if international chains like Chic Fillet or Jollibee makes a big bang entry into India in the next 1 or 2 years .
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Great points,
Let me try to gather all the antithesis pointers i have read/found till now here (please add if i miss any)
Also trying to give a severity to the red flags
- promotor cases related to tax which they settled some years back
- once asked for royalty which decision they quickly revoked
- pledged holding, though they reduced it now, but in same time shareholding got reduced too, maybe due to selling of those pledged shares
- not so prudent capital allocation geography wise (generally we see businesses going in geographies similar/ developing countries like Brazil, bangladesh etc not turkey russia Europe etc)
- disconnect between professional management and promotors on capital allocation decisions (as mentioned by @Chandragupta sir)
- hongs/ ekdum/Popeyes might be a failure like donuts if not focused on its growth
- valuation is still not cheap
(Add other red flags if i have missed any)
Finding Antithesis pointers is a good excercise even if one is bullish on the business because it tells us when to sell!
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Hello @Chandragupta
Excellent illustration.
Just want to understand your mind in a broader sense, you indicated that “were clear signs of not doing well”, have you reduced your stake? Typically when you will do so like wait for 2-3 more qtr? Am asking as many times as I also face a similar dilemma sensing that something is not right or clear with co, want to understand your thought process on such a situation.
Thanks.
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I think there is no problem with company.
Dominos has got the unit economics right, hence I don’t see any problem arising out of this Brand for the time being.
With Gross Margins standing tall at 78% and Working Capital remaining Negative, Something has to go really wrong for the Business for decline from this stage.
New high growth will come from Popeye’s.
It’s just market narrative. See what happened in 2020, Crude to Gaya…even went negative… now hitting above 100.
Same thing is happening with technology. It will again reverse back.
I still believe there is no problem with Jubilant. Even a very good opportunity with this down price action.
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Hi @Deven, My last purchase of Jubilant Foodworks was in May ’19 and I sold part of my shares in June ’20. After that I have no buy or sell transaction. I am trying to become a reluctant seller lately since most of my mistakes have been of selling too early. With this latest development (CEO resignation), my current frame of mind is to wait for the new CEO to come and then take a call.
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Dominos is simply a case of a monopoly which is not going away anytime soon . Its become an unknowingly a habit and a taste of a pizza is generally compared to a Dominos. This is typically what Maggi has achieved with instant noodles , Parle with is glucose biscuit and Dominos with its Pizza and to an extent KFC with their Fried Chicken in the Indian context
The fact is that Indians consider thick dough filled Pizzas with that absurd amount of what they call liquid cheese as the gold standards of Pizza. Ask an italian or go try an authentic pizza in Italy and see for urself . What we are served is just huge amount of flour and hydrogenated vegetable oil filled liquid cheese , with some real cheese and tomato base and toppings . Is it tasty . Hell yes it is damn tasty to a point that the aroma of a Dominos has also been imbibed in the urban population .
The dominos business is a business which will run on its own be it a good management or an average management. People will still rush for Dominos in India be whatever price they ask for…
What is more important is that aroma, that taste which is now a part of Indian food culture should not be compromised . SSGR growth or not there is ample opportunities to tap in India in Tier 2 , 3 , 4 towns with rising per capita there are ample growth opportunities . They are monopolistic so price control is in in their hands . I remember few years back there were Value pizzas selling in range of 59 or 79 even that range has gone up to somewhere around 100 to 150 so they have the pricing power game in control
It will be a matter of concern if the quality , supply chain and marketing take a plunge and then the questions of SSGR and stuff would come up .
The essence of valuing and owning such a company can only be if they can build another solid business like Dominos in the future . All know their existing business ventures cannot scale like a Dominos . The only one currently which they can scale up to Dominos level is Popeye’s. These are the only two businesses one needs to observe in depth while dealing with Jubliant and consider other businesses as splurging or taking outsized risks which they can take considering the maturity of Dominos . Ekdum and Chef Boss can be an underdog but not sure about the exact market size it can cater . Chinese cuisine is anyways not a cuisine currently where there can be a huge scalability potential especially considering the huge number of restaurants selling similar dishes plus a negative anti China sentiment during war or any other time can easily derail the growth story .
To rate the businesses
Top tier businesses
- Dominos
- Popoyes
Can be good bets
3. Ekdum
4. Chef Boss( market potential but again how quickly it can grow. Also being an unrelated business this is something which they shouldn’t have invested in the first place as per my opinion )
Not so good investments
- Dunkin Donots ( the worst one maybe )
- Hongs Kitchen
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