This, coupled with margin expansion despite input cost inflation, led to profit upgrades for the stock. At the current price (₹433.95), the stock, which has shed about 25 per cent of its value over the last year, is trading at 75 times its FY28 earnings estimates.
India revenue for Domino’s grew 9.2 per cent Y-o-Y. This was powered by order growth, which was up 6.3 per cent Y-o-Y. While delivery revenue grew 11.3 per cent, its share of the sales mix rose to 75.8 per cent. The company added 88 net Domino’s stores during the quarter, taking the total to 2,601 stores.
LFL growth also aided the overall performance as the metric improved for the third consecutive quarter to 4.1 per cent despite a high base of 9.1 per cent. LFL growth for Q1FY27 had come in at 2.5 per cent, while Q4FY26 saw growth of 0.2 per cent. On a two-year basis, LFL growth stood at 14 per cent, among the strongest of its listed QSR peers.
Dine-in and takeaway (DITA) revenue grew 2.4 per cent Y-o-Y. This is the first quarter of growth after a prolonged decline. The company has completed infrastructure upgrades in 20 per cent of the 400 identified DITA-heavy stores. The overall programme is expected to be completed over the next three quarters.
The company wants DITA to stop being a drag on LFL growth, and adding even 1-2 percentage points to LFL could materially improve both growth and margins.
ICICI Securities expects a stronger second half, given a soft base and festive demand supporting LFL acceleration towards the target of 5-7 per cent. The brokerage has maintained a buy rating with a target price of ₹500.
In addition to Domino’s, the Popeyes segment also reported a strong performance, with revenue rising 122 per cent Y-o-Y on the back of 53 per cent LFL growth. Its network is now at 99 stores, aided by the addition of 11 stores on a sequential basis. Elara Securities points out that Popeyes still accounts for only 4 per cent of standalone revenue, but better store economics and calibrated expansion of 40-45 stores a year should narrow losses. The brokerage has upgraded the stock to a buy from accumulate, with a target price of ₹580.
On the profitability front, gross margins expanded 110 basis points Y-o-Y to 75.5 per cent, led by sourcing efficiencies, price hikes and menu-mix optimisation. The gains came despite a 200-basis-point impact from raw material inflation. Of this, the company was able to absorb 140 basis points while taking a hit on the rest. Higher employee costs and other expenses reduced the operating profit margin gains at the standalone level to 16 basis points, taking the margin to 19.8 per cent. The consolidated operating profit margin contracted 83 basis points to 19.7 per cent due to hyperinflation at DP Eurasia operations. Antique Stock Broking expects margin expansion to remain gradual, as the complete cost inflation is yet to be offset.
The brokerage expects 10-16 per cent growth in revenue and operating profit over FY26-29, driven by strong product innovation, a focus on driving growth through an aggressive price-value equation and a gradually improving macroeconomic situation. It has a buy rating with a target price of ₹610.
