Brokers’ take: Maybank initiates coverage on Jollibee Foods with ‘buy’
Chong Xin Wei
MAYBANK Securities initiated coverage on Jollibee Foods (JFC) on Tuesday (Jun 13) with a “buy” call, in view of strong earnings growth driven by robust domestic spending and rising margins in the company’s international segment.
The brokerage set a discounted cash flow-based target price of 285 Philippine pesos, which implies a potential upside of 21.8 per cent from the last traded price of 234 Philippine pesos as at 2.43 pm.
The target price is 36.7 times Maybank’s earnings estimates for FY2023. It also represents a premium to JFC peers’ weighted average price-to-earnings ratio of 20.1 times.
Analyst Daphne Sze said: “We believe (the premium) is warranted, as JFC is a dominant market leader in a country that boasts above-average consumption growth and young demographics.”
She is positive on JFC’s earnings growth amid higher revenue contributions from new stores and increased dine-in sales. She expects the group’s FY2023 and FY2024 earnings to rise by 14 per cent and 18 per cent year on year (yoy), respectively.
She also projects revenue to increase by 17 per cent yoy in FY2023 and 11 per cent yoy in FY2024. This is because JFC opens 500 new stores each year, of which 100 to 150 are located in the Philippines, said the analyst.
Domestic revenue contributions, which are predicted to make up 55 per cent of revenue in FY2023 and FY2024, could also be supported by sales from new stores in the country and higher dine-in sales.
Sze noted that JFC is a “direct beneficiary” of domestic consumer spending, which she believes is set to grow by 6 per cent in FY2023 and 6.7 per cent in FY2024.
Furthermore, she expects dine-in sales to contribute 45 per cent to domestic revenue, up from 39 per cent in FY2022.
She also said that revenue contribution from JFC’s international segment will grow by 23 per cent yoy in FY2023 and 12 per cent yoy in FY2024, on the back of sustained sales recovery in China. She estimates the group’s international segment to make up 45 per cent of FY2023 and FY2024 revenues.
The analyst also believes that JFC will be able to achieve its goal of equal revenue mix – from the domestic and international segments – by FY2028, given its investment capacity of 115.6 billion Philippine pesos (S$2.8 billion) as at March 2023.
As at FY2022, the domestic segment makes up 61 per cent of the revenue mix, while the international segment 39 per cent.
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Delivered to your inbox. Free.
Copyright SPH Media. All rights reserved.
