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ICICI Securities Report
We view Domino's charging delivery fees ranging from Rs 21 to 42 as a positive for stock in the near term as it will help mitigate headwind of negative operating leverage. Yes, consumers are not prioritising in financial year 2021 and hence negative price elasticity is not a worry. However, implementing a price increase in times like these, seen in conjunction with 'variabilisation' of delivery personnel wages and renegotiation of rentals may potentially be interpreted as opportunistic.
Importantly, Domino's brand has worked hard, since 2017, to improve the RTB (reasons to buy) of ‘’. This might be at risk in long term. Ceteris paribus which is unlikely, this delivery fee leads to approximately 20% upgrade in recurring profits for financial year 22 and beyond. Though we remain structural bulls of the Jubilant story, we highlight that gaining market shares in a likely declining industry that too in a high operating leverage industry is a tough journey to traverse.
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