Is Jubilant Ingrevia a good buy?

In the shorter term, the fall in Jubilant’s share price could prove to be a buying opportunity as the current price tag looks extremely attractive. As we have mentioned, Jubilant is a multinational conglomerate and the company does hold quite a few valuations. Jubilant’s revenues grew by over 9% in FY16 and are expected to remain flat or rise by low single-digits in FY17 as well.

In addition to that, the company has fixed the price at just 4.9x FY17 EBITDA and the average multiples for other pure-play FMCG companies in India are between 10x and 18x FY17 EBITDA.

This is almost half of Jubilant’s average valuation. As we have seen, share prices have historically been driven by such deals and share prices tend to correct in the subsequent quarters. Share prices tend to recover in the initial quarters following such moves, indicating that Jubilant could be a good buy.

Note:

We recommend you to read our full coverage on Jubilant Food works to understand the business.

ISSUER: Jubilant Food works Ltd

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Report Description:

Jubilant Food works Limited is a food and hospitality conglomerate and the largest food retailer in India. It operates a chain of stores under the brand name of Jubilant Food works and is headquartered in the suburbs of Mumbai. It is one of the largest organised food and retail companies in India with operations in 13 states and a commercial presence in 23 cities.

It holds a portfolio of brands that span the retail food industry from retail format of supermarkets to food service sector. It is one of the fastest growing retail companies in India.

Related;

However, in order to understand the company better, we made a list of stocks similar to Jubilant Food works, which could have similar business valuations but are trading at very different valuations. We have created the table below to help the investor see how Jubilant’s valuation looks like compared to companies in the sector. However, we have made it clear that the share prices of Jubilant Food works have been priced very low in the market.

 Share price of Jubilant Food works has fallen further and closed at Rs 1,184.5 on Thursday, November 23, 2017, down by almost 15%.

Devangshu Datta, Vice President at MarketsandMarkets, has an article titled “Food For Investors – 9 Shares Of Indian Brands At All-Time Lows”.

Note:

All prices are in Indian rupees

ONGC:

A share of Jubilant Oil shares is worth about Rs 27,000 for shareholders as on the last closing price. A share of Jubilant Oil trades at 7.9x the FY17 EBITDA.

Share prices of Jubilant Oil have been corrected on the back of oil prices crashing in the recent months.

Jet Airways:

Share prices of Jet Airways have also seen a drop in the past few months and currently, the company trades at 3.4x FY2017-18 EBITDA, lower than Jubilant Oil at 3.7x. This indicates that shares of Jet Airways have also been priced low in the market. Share prices of Jet Airways have also seen a drop in the past few months and currently, the company trades at 3.4x FY2017-18 EBITDA, lower than Jubilant Oil at 3.7x.

This indicates that shares of Jet Airways have also been priced low in the market.

Topline Data:

Share prices of Jubilant Food works and Jet Airways have seen a higher negative spread compared to Jubilant Oil. Hindalco Industries: Shares of Jubilant Food works are currently trading at 3.7x the FY2016-17 EBITDA. Share prices of Jubilant Oil are also trading at 3.7x the FY2017-18 EBITDA. However, shares of Jubilant Oil have corrected in the past few months, on the back of oil prices crashing.

This indicates that shares of Jubilant Oil have also been priced low in the market.

TVS Motor Company:

Shares of Jubilant Oil are trading at 3.7x the FY2016-17 EBITDA. The forward price to EBITDA ratio for TVS Motor Company is also 3.7x. Share prices of Jubilant Oil have corrected in the past few months and currently, the company trades at 3.7x the FY2017-18 EBITDA.

This indicates that shares of Jubilant Oil have also been priced low in the market.

Itinerant Foods:

Shares of Jubilant Food works are currently trading at 2.4x the FY2017-18 EBITDA. Shares of Jubilant Food works are also trading at 2.4x the FY2017-18 EV/EBITDA for Itinerant Foods.