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Wednesday, May 11, 2011

Buy Stocks of Jubilant Foodworks for long term investing

One of the stock broking firm executive, Gopinathna Natarajan from IIFL is of opinion to buy stocks of Jubilant Foodworks whenever the stock dips due to correction. Why so?

Do you buy stocks for investment? Do you eat Domino's pizza? If answer is yes to both, probably you might want to take "a piece" of "share" from Domino's pizza, not only from their pizza center but in stock markets too!

Jubilant Foodworks is a company that franchises and owns the network of Domino's pizza in India. It has a good theme to play on. It is from one of the fastest growing industries i.e. fast food industry. Indian middle class is growing and growing and growing. And so it's purchasing power and desire to spend. Western fast food is one of the items middle class is turning to at rapid space. Domino's and Pizza hut Pizza, Mcdonald's Burgers etc.

So Jubilant foodworks provides you an opportunity to play on this demographic shift by middle class Indian consumers. They have a market share of almost 70% in market. The total size of market amounts to roughly a USD 2 billion in India. The break-even point (starts generating profits after meeting the initial setup costs) in this market is very short.

The pizza business in India is experiencing very high growth rate for some time now and it is going see the same phenomenal growth for coming time looking at the huge growing middle and upper middle class income group.

The stock at current stock price is not cheap at all at P/E of 75 which breaks principles of value investing. But if stock corrects in case of stock market corrections, it is a good stock to buy at dips for it's growth story.

1 comment:

  1. This stock is extremely overvalued.
    Means I dont remember any stock trading at 40 times BV.
    NEVER in my 3 yrs of experience.
    Its totally against value investing.
    I agree it a great business model but definitely not at GREAT PRICE for retail investors.
    With Regards,
    Vikas

    ReplyDelete

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