Analysts at global brokerage Macquarie expect Jubilant Foodworks shares to ‘underperform’ in the next 12 months with a possible downside of around 38 percent due to an uncertain demand outlook and higher capital expenditure to elevate stores.

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The brokerage, in a note, assigned an ‘underperform’ (U-P) rating on the stock with a target price of Rs 330 per share, implying a potential downside of 38 percent from Wednesday’s close of Rs 540.35 on the BSE.

Ahead of the ICC Cricket World Cup, analysts observed that they did not see Jubilant Foodworks same-store sales (SSS) growth benefit from ICC Cricket World Cup-related demand in 2019 despite supportive match timings.

Same-store sales is revenue generated by a retail chain’s stores over a certain period compared to that period in the previous year.

Macquarie stated that an increased competitive intensity from aggregators and peers raise risks of SSS benefit being muted like in 2019 against strength seen in 2011.

“An uncertain demand outlook, investments needed to ramp up dine-in, and elevated store addition-linked capex raise risks to earning per share (EPS),” the brokerage said.

Analysts believe current valuations price in a “15 percent + sales CAGR over the next 17 years and an EBITDA margin after cash rentals of 21-22 percent against highs of 18 percent seen to date”.

Shares of Jubilant Foodworks, the operator of fast-food chains Domino's Pizza and Dunkin' Donuts, have rebounded by more than 6 percent in September but the stock trades down around 17 percent from its 52-week high of Rs 652.20 hit on October 6, 2022.

Jubilant FoodWorks had reported a 74 percent year-on-year decline in consolidated net profit to Rs 28.9 crore in the April-June quarter even as its revenue rose by 6 percent to Rs 1,334.5 crore in the quarter over the year-ago period.

Shares of Jubilant Foodworks were trading at Rs 535.75 apiece, down 0.85 percent , on BSE at 10:51 AM.