Why Jubilant FoodWorks Share Price is Falling

Share price of Jubilant FoodWorks tanked over 5% in intraday trade yesterday. Earlier in the day, the stock saw a gap up opening. Today, the stock is up 2%.

The company operates fast-food chains. Its popular chains include Domino's Pizza and Dunkin' Donuts.

So, what led to the sudden decline in share price? Let's find out.

#1 FII selling

Interest rates are rising in developed markets such as the US. It has made emerging markets less attractive for FIIs.

Hence FIIs are selling their holdings in India. So far in 2022, FIIs have sold Rs 2.3 tn worth of equities in the country.

The pressure of this selling was witnessed in the share of Jubilant FoodWorks as well. FIIs have been divesting their stake since the June 2021 quarter. FII's stake stood at 41.7% in the March 2022 quarter.

The stake reduced to 29.8% by the end of the June 2022 quarter.

For more details, check out Jubilant FoodWork's latest shareholding pattern.

#2 Inflation

Jubilant FoodWorks, for the June 2022 quarter, saw a 44% YoY rise in the cost of goods sold (COGS) due to inflation.

Due to the increasing cost of raw materials, fuel and high labor costs, the operating margin of the company also reduced.

Prices of vegetable oil, including palm oil and sunflower oil, the key commodities for FMCG companies, are up almost 50% over the last 12 months.

Slow demand has also made it challenging to pass on any increase in cost to the consumer.

#3 Steep valuation

The company is trading at a PE (Price to Earning) multiple of 76.6x and a PB (Price to Book value) ratio of 19.1. This is higher than the industry PE multiple of 41.1x.

The recent correction could be due to profit booking based on this steep valuation.

From an investment perspective, value investors usually refrain from trading the shares of such companies. The overvalued stock price makes the company prone to market risk.

How shares of Jubilant FoodWorks have performed recently

The shares of the company opened at Rs 592 per share and reduced over 5% yesterday. Over the last month, the stock is down by almost 2%.

So far in 2022, the stock is down by 21.7%. Over the year, shares of the company are down by 24.7%.

The company touched its 52-week high of Rs 918 on 18 October 2021 and its 52-week low of Rs 451.2 on 12 May 2022.

About Jubilant FoodWorks

Jubilant FoodWorks is a part of the Jubilant Bhartia Group.

It has two strong international brands in its portfolio Domino's Pizza and Dunkin' Donuts.

The Indian food service company has the exclusive rights to develop and operate Domino's Pizza brand in India, Sri Lanka, Bangladesh, and Nepal.

Domino's Pizza offers a menu of quality pizza and side dishes to their customers. It also has exclusive rights for developing and operating Dunkin' Donuts restaurants for India.

For more details about the company, you can have a look at Jubilant FoodWorks factsheet and quarterly results on our website.

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