Also read: Jubilant still seeking Dunkin' Donuts' sweet spot in India
Below is the edited transcript of Makwana's interview to CNBC-TV18.
Q: Can we draw a comparisons between Yum Restaurants and Jubilant Foodworks in terms of the same store sales growth?
A: If one looks at this six quarter data, there is a strong correlation between Yum India same store sales growth (SSG) and Dominos SSG. During this period, Yum India SSG came down from about 8 percent levels to 0 percent for Q2 reported a day back. And during the same period Dominos SSG came down from about 25 percent to 6.3 percent reported in the last quarter.
Now leaving aside the June ending quarter, there is very similar change in SSG for both the companies in terms of directional move. Both the companies have been witnessing declining SSGs as far as their Pizza business is concerned.
Interestingly, in the June quarter, Yum actually reported improvement in SSG from minus 3 percent to 2 percent on a quarter-on-quarter (QoQ) basis. Despite that improvement for the last quarter in Yum India, Jubilant actually reported a declining trend and its SSG declined from 7.7 percent to 6.3 percent for Q1.
Hence, if I were to draw conclusions from the behaviour exhibited by these SSG numbers, frankly in recent times Yum India has focused their energies on India business and they have been doing a lot of things in terms of increasing their presence, increasing number of stores, getting into delivery business which is working well for pizza. That is probably where the division for Q1 was where Yum actually improved and Jubilant continued the declining trend.
If I were to extrapolate that into the next quarter and the fact that Yum has witnessed pressure with the declining SSG from 2 percent to 0 percent, I would presume that Jubilant would be reporting a similar trend with a declining SSG.
Q: What is your expectation for Jubilant Foodworks in this quarter in terms of earnings as well as going into FY14?
A: For this quarter we are actually expecting the Jubilant's topline growth to be around 30 percent to Rs 444 crore and we are expecting marginal 20 bps improvement in quarterly EBITDA margin from 16.8 to 17 percent. That should see the company clock about Rs 40 crore net income for the quarter.
What is interesting for this quarter is the trend for Jubilant's SSG that after hitting a high of 44 percent in Q2 of FY11, saw a continuous decline to the 6.3 percent reported last quarter.
If I were to break that down 6.3 percent into volume growth and pricing growth, the pricing growth for the last quarter was about 8.1 percent and the volume decline to the extent of about 1.8 percent on a year-on-year basis. Interestingly, for the next quarter this 8.1 percent price hike run rate will actually fall down to 5.7 percent that is because of higher base last year.
Now given that phenomenon, if Jubilant doesn't improve on their volume growth performance this quarter then on a similar volume growth perspective the SSG will fall down by approximately 2.6 percent without any change in the volume growth. Basically, the target for Jubilant is going to be even steeper because the pricing tailwind is going to start subsiding starting this quarter.
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