Kotak sec has the following recommendation on Jubilant Foods,
We upgrade JUBI to REDUCE from SELL as the stock has corrected 18% over the last two months and has underperformed BSE Sensex by 15%. We continue to like JUBI’s strategy of penetration-led growth, tapping new distribution channels and ongoing investment in human resources. We revisit a key investor query on JUBI – “What is the level of operating leverage?” Maintain estimates and target price of Rs290. We model EPS CAGR of 33% over FY2010-12E.
We model EPS of Rs7.7 (yoy growth of 40%) and Rs9.7 (yoy growth of 25%) in FY2011E and FY2012E, respectively. Despite strong near-term earnings forecast and a favorable view, we find it difficult to justify the current valuation of the company (PE of 37X FY2011E).
