This has been one of the favorite stocks of speculators over the last many months.
If one has to simply look at the fundamentals it really hits us as to why would you buy this stock at 850-900 levels ?
Things to note.
-> Current Market Cap of Jubilant Foodworks – 1.1 billion US dollars or around 5500 cr Re. Current Market Cap of Dominos USA – 1.69 billion dollars. (
-> Current P-E of Dominos USA around 18-19. Current P-E of 68-70 for Jubilant Foodworks.
There are just too many Indian companies available at 5000-6000 crores market cap like Godrej Inds, Indian Hotels, Tata Global who have been around for decades :). Although there is no comparison to above but it clearly tells you the size of Jubilant Foodworks.
Now certain other things which create big doubts on the company.
- > Delivery Volumes are only 10-25%. Implies 75% of the trades are squared of intra day !!! I doubt Institutions trade in it so is some one manipulating ? circular trading ?
-> Total Daily Volumes on NSE itself is around 15-25 lakhs and another 8-10 lakh shares on BSE. This gives a total volume of around 25-30 lakhs every day.
-> Total No of shares is around 6.4 cr of which 59% is promoters and 20% with institutions which leaves us with a floating no of shares of around 1.2 cr shares. Many other institutions would be holding less then 1%.
On so many days it has even traded as high as 50 lakh shares in a day. That is way too high for an investors comfort
-> Promoters have sold some stake at higher levels.
|13-Sep-11||Jubilant Foodworks Ltd||Jubilant Enpro Pvt Ltd||Sell||170,000||02-Sep-11|
|09-Sep-11||Jubilant Foodworks Ltd||Jubilant Enpro Pvt Ltd||Sell||27,392||29-Aug-11|
|07-Sep-11||Jubilant Foodworks Ltd||Jubilant Enpro Pvt Ltd||Sell||40,000||26-Aug-11|
|06-Sep-11||Jubilant Foodworks Ltd||Ajay Kaul||Sell||55,000||02-Sep-11|
|02-Sep-11||Jubilant Foodworks Ltd||Jubilant Enpro Pvt Ltd||Sell||102,220||17-Aug-11|
Majority of the stake has been sold from 17 August to 13 September. The stock price then was between 920-1020.
Mr Ajay Kaul ( CEO ) selling of 55000 shares was between 02 September to 06 September. The stock price was at 950-1020 for that 4 days only and once it was reported to the exchange the stock took a hit it seems or mr Ajay Kauls timing was brilliant. He has only sold part of his holding apparently.
Stock subsequently hit 650 and is now back to 850-880.
-> The promoter holding has declined from 62.07% to 58.88 % as of last quarter and ma fall further in this quarter.
-> The company does sales of less then 1000 crores and with decent NPMs. As the business grows which people expect the NPMs are set to drop is what i feel.
-> Even if the company keeps growing at current pace the stock price is way too high at 850-900 bucks and is already factoring high growth for next 1-2 years.
All in all there are way too many question marks in the above stock. How long can the company grow profits at 50% y-o-y. What if the NPMs drop. The growth takes a hit due to competition or some undue announcement. The delivery volumes show lot of speculative interest.
There seems no Margin of Safety and Way too much Risk in the above stock. !!! ---- My view its a clear AVOID !!! Even for the day traders take CARE