Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
10,840.6523.05
Stock Analysis, IPO, Mutual Funds, Bonds & More

Watch this stock for early signs of economic revival

Eating out is one of the first expenditures that consumers reduce when the economy slows.

Bloomberg|
Updated: Sep 11, 2019, 10.49 AM IST
0Comments
shutterstock_769571053
by Ishika Mookerjee

For equity investors seeking early signs of any revival among India’s consumers, here is a stock to watch: the distributor of Domino’s Pizza and Dunkin’ Donuts in the country.

Jubilant Foodworks, the nation’s biggest fast food stock and a bellwether for discretionary consumption, has seen its shares shed almost a quarter of their value from a record high about a year ago as Indians cut back on spending. But some analysts are seeing light at the end of the tunnel.

Eating out is one of the first expenditures that consumers reduce when the economy slows, but restaurants are also the first to benefit when sentiment turns around. The Indian government has taken steps to bolster its fragile economy in the past month, and some economists expect the central bank to make deeper interest-rate cuts.

344633561

“The consumption trend seems to have bottomed out, and the government has started announcing some stimulus measures,” said Manoj Gori, an analyst at Equirus Securities Pvt. who advises investors to buy Jubilant’s stock. “Once consumers get their confidence back, eating out will be the first point of spending,” said Gori, who estimates the shares can return about 15 per cent within 12 months.

Adding to the potential tailwinds, economists including those at Goldman Sachs Group Inc. are predicting more interest-rate cuts by India’s central bank to revive the pace of expansion after 110 basis points of easing already this year. Analysts who track Jubilant at Edelweiss Financial Services Ltd. predict Jubilant’s profits will increase by 15 per cent in fiscal year 2020 as consumer spending revives and the company expands its business.

The company began venturing into Chinese food with its first own brand, Hong’s Kitchen, six months ago, which may arrest a trend of slowing same-store sales since 2018, analysts say. The new chain targets a food market that’s three times larger in terms of sales than that of pizzas, Citigroup Inc. analysts wrote in a note last month. Citi rates the stock as buy, with a 12-month price target of 1,400 rupees.

344633727

Calls to the company went unanswered and it didn’t reply to emails seeking comment.

“We believe margins are going to improve and Hong’s Kitchen is going to be a very strong silver lining,” said Ashish Chaturmohta, the Mumbai-based head of technical and derivatives strategy at Sanctum Wealth Management Pte. “People can expect good profitability to come to the company.”
Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service