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Investing.com - JPMorgan has initiated coverage on Guzman y Gomez Ltd (ASX:GYG) with an Underweight rating and a price target of AUD24.00.
The Mexican fast-food chain currently operates approximately 225 stores in Australia and has proven its store economics within the competitive quick-service restaurant industry, according to JPMorgan’s analysis.
JPMorgan believes GYG can execute on a pace of 30-40 new store openings annually over the next 5-10 years, but considers the company’s 1,000-store target optimistic. The firm’s bottom-up analysis indicates potential for about 800 sites within 15 years, with an additional 16 years needed to reach 1,000 locations.
A proprietary customer survey conducted by JPMorgan shows the Mexican food category is experiencing better demographic and health trends than other quick-service restaurant segments, with GYG dominating the Mexican QSR space. The research also indicates Mexican food particularly resonates with younger consumers.
JPMorgan’s Underweight rating comes ahead of the release of the remaining 75% of escrowed shares following GYG’s FY25 results, representing approximately 40% of the company’s register.
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