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Summary of Broker’s Recommendation
| Stock Code | JFC |
| Company Name | Jollibee Foods Corp. |
| Broker | AP Securities |
| Opinion Issued on | 11 Apr 2024 |
| Recommendation | Buy |
| 1-Year Target Price | PHP 335.28 |
We remain positive on JFC’s long-term growth prospects and we see the recent major price drop as an opportunity to buy the stock at lower prices. Upside from current price is still substantial relative to our Target Price of P335.28. Additionally, we note that our forecasts already factor in the near-term challenges in the coffee and tea segment as we revised our same-store sales growth (SSSG) projections from high teens to slightly above 9%.
Analysis and Opinion
Global domination
JFC announced last week, its capital commitment of 90-Million SGD in Titan Dining II LP as the company continues with its international expansion plans. The capital commitment would be equivalent to a 90% participating interest, made through Jollibee Worldwide Pte. Ltd. (JWPL), JFC’s wholly-owned subsidiary. Alongside this, the company is also putting up $28-Mn for a 10% stake in Botrista Inc., which is a company that allows the customizability of drinks through their beverage technology development.
Tempering bullishness
Although this aligns with JFC’s 50- 50 PH-International split goal by 2028, there is a cause for concern towards their Coffee and Tea segment. Note that previously, we significantly revised our projections for CBTL downwards, citing weaker demand. Also, upon checking JFC’s EBITDA numbers, we noticed a significant decline in their Coffee and Tea segment, dropping 21.3% YoY as management said that in Tier 3 cities in China, people are not providing as much footfall in stores given the current lack of confidence in the economy. Additionally, other coffee players in the US such as Starbucks have also been exerting competitive pressure.
Sticking for the long-term
Albeit JFC’s current focus on expanding their weakening Coffee and tea business is net negative in the near term. We see JFC benefitting from the long-term growth prospects of the global coffee and tea space with revenue forecasts for the coffee market projected to grow at a CAGR of 10.7% for 2024-2029 while a CAGR of 10.2% for 2024-2029 is projected for worldwide tea revenues.
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