JM Financial-eRr Groups-Just Dial-Strong Operating Metrics

JM Financial Institutional Securities Limited

Strong operating metrics; Profit miss on

once-off spends

Just Dial’s (JD) revenue momentum (+29% YoY) and other operating metrics

remained strong in 1QFY15. Reported EBITDA, however, fell 6% YoY on

account of once-off spends on advertisements and data/content acquisition.

Key highlights: 1) 15,800 new campaigns added during the quarter (+25%

YoY) – significantly higher vs average addition of 13,900/qtr in FY14. Total

listings grew 48% YoY and 19% QoQ. 2) Realization grew 3% YoY/QoQ –

improved customer-mix and in part due to the price-hikes taken in 3QFY14.

3) Interestingly, JD is considering termination of its license agreement with

Justdial Global (a group company). This could potentially create new revenue

streams for JD (details below). Strength in JD’s 1Q business momentum re-

inforces its LT growth potential, in our view. Near-term, growth revival in the

economy and concomitant improvement in SME business sentiments could

drive JD’s business momentum higher.

Strong operating metrics: JD’s 1QFY15 net sales grew 29% to `1.35bn but

EBITDA declined 6% to `340mn (OPM of 25.2% vs 34.7% LY) on account of

once-off spends of `100mn relating to advertisements and data/content

acquisition. Reported net profit was flat at `281mn. Ex-once-off, EBITDA/net

profit grew 21%/25% respectively – broadly on expected lines. The company’s

efforts at increasing paid-listings (‘campaigns’) appears to be bearing fruit

with 15,800 net campaigns added during the quarter. Total listings grew 48%

YoY (14.1mn vs 9.5mn LY, 11.8mn at Mar’14); This, to us, reflects JD’s

success in penetrating tier-2/3 cities. Details on search/usage traffic, mobile

contribution etc still awaited from management. Employee expenses grew

38% - largely relatable to incremental manpower (23% growth in employee

strength) for the Search-Plus initiatives (20 services now live on the platform

vs 17 as at Mar’14) and to acquire more listings.

Global expansion under consideration; License agreement with JD Global

likely to be terminated: JD is looking at expansion of its services to global

markets with specific focus on EMs, where the potential for its kind of

services is huge. Separately, it is also considering termination of its license

agreement with Justdial Global (a group company) for operations in

US/Canada post which the license to operate in all geos would rest with JD.

These changes could, we believe, create additional revenue-streams for JD;

Value-capture from the same would, inter-alia, depend upon the terms of the

termination that would be arrived at and JD’s ability to execute a global ramp-

up successfully.

Management Conference Call on Monday, July 28th

: JD management would

be hosting a conference call on Monday, July 28th

at 6PM IST. The dial-in

numbers are: Mumbai: +91 22 6746 5860/3960 0760, USA: 1 866 746 2133,

UK: 0 808 101 1573, Singapore: 800 101 2045, HK: 800 964 448.

Saurabh Lohariwala

[email protected]

Tel: (91 22) 6630 3099

Just Dial | JUST IN

26 July 2014

India | Internet | Flash Update

Price: `1,626

JM Financial Research is also available on:

Bloomberg - JMFR <GO>, Thomson Publisher & Reuters.

Please see important disclosure at the end of the report

Just Dial 26 July 2014

JM Financial Institutional Securities Limited Page 2

Exhibit 1: 1QFY15 results summary (` mn)

1QFY15 1QFY14 YoY Chg % 4QFY14 QoQ Chg % 1QFY15E % Variation

Net Sales 1,350 1,046 29% 1,242 9% 1,338 1%

Staff Costs 673 487 38% 625 8% 650 4%

Other Expenses 337 196 72% 243 39% 258 30%

EBITDA 340 363 -6% 374 -9% 430 -21%

EBITDA margin (%) 25% 35% 950 30% 0.0 32% 691

Depreciation 57 42 35% 44 31% 46 25%

Interest

0 0% 0 0%

0%

Other Income 97 73 33% 129 -25% 132 -26%

PBT 380 393 -3% 459 -17% 516 -26%

Tax 99 113 -13% 118 -16% 139 -29%

Reported Net Profit 281 280 0% 342 -18% 376 -25%

Net Profit Excluding Once-offs 351 280 25% 342 3% 376 -7%

PAT margin (%) 26% 27% 82 27% 0.0 28% 213

Reported EPS (Rs.) 4.0 4.0 0% 4.9 -18% 5.4 -25%

Source: Company, JM Financial

Exhibit 2: Operating performance

4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 YoY % QoQ %

No of listings (Mn) 9.1 9.5 10.1 10.8 11.8 14.1 48% 19%

No of campaigns 206,500 221,500 238,650 249,600 262,150 277,950 25% 6%

Net addition 11,400 15,000 17,150 10,950 12,550 15,800 5% 26%

Campaigns(% of listing) 2.3% 2.3% 2.4% 2.3% 2.2% 2.0% -15% -11%

Revenue per campaigns 19,035 18,882 18,883 19,208 18,953 19,261 2% 2%


Exhibit 3: Revenue trend (` mn) Exhibit 4: EBITDA and OPM trend

817 876

952 983 1,046

1,127 1,199

1,242

1,350

-

400

800

1,200

1,600

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Net sales - Rs mn

31%28%

25%

28%

35%

31%

28%30%

25%

0%

10%

20%

30%

40%

0

100

200

300

400

500

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

EBITDA Rs mn EBITDA margin

33%

Source: Company, JM Financial Source: Company, JM Financial



Exhibit 5: Employee Benefits Expenses Exhibit 6: Other Expenses

50%

49%

47%

50%

47%

51%

50%50%

50%

44%

46%

48%

50%

52%

0

200

400

600

800

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Employee benefits expense Rs mn % of sales

20%

23%

26%

22%

19%

17%

22%

20%

25%

10%

15%

20%

25%

30%

0

100

200

300

400

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15

Other expenses - Rs mn % of sales18%

Source: Company, JM Financial Source: Company, JM Financial



Financial Tables (Standalone)

Profit & Loss (` mn)

Y/E March FY12A FY13A FY14E FY15E FY16E

Net sales (Net of excise) 2,621 3,628 4,613 6,019 7,655

Growth (%) 42.5 38.4 27.2 30.5 27.2

Other operational income 0 0 0 0 0

Raw material (or COGS) 0 0 0 0 0

Personnel cost 1,308 1,779 2,286 2,815 3,467

Other expenses (or

SG&A) 640 841 905 1,399 1,588

EBITDA 672 1,008 1,422 1,805 2,599

EBITDA (%) 25.7 27.8 30.8 30.0 34.0

Growth (%) 48.1 50.0 41.0 26.9 44.0

Other non-op. income 132 135 400 512 620

Depreciation and amort. 90 144 173 200 277

EBIT 714 1,000 1,649 2,117 2,942

Add: Net interest income 0 0 0 0 0

Pre tax profit 713 1,000 1,649 2,117 2,942

Taxes 209 300 443 571 809

Add: Extraordinary items 2 -15 0 0 0

Less: Minority interest 0 0 0 0 0

Reported net profit 506 685 1,206 1,545 2,133

Adjusted net profit 506 685 1,206 1,545 2,133

Margin (%) 19.3 18.9 26.1 25.7 27.9

Diluted share cap. (mn) 65 69 70 70 70

Diluted EPS (`) 7.8 9.9 17.2 22.0 30.4

Growth (%) 69.2 27.8 72.9 28.1 38.1

Total Dividend + Tax 0 0 163 245 326


Balance Sheet (` mn)


Share capital 531 695 702 702 702

Other capital 0 8 0 0 0

Reserves and surplus 542 3,556 4,643 5,944 7,750

Networth 1,072 4,259 5,345 6,645 8,452

Total loans 0 0 0 0 0

Minority interest 0 0 0 0 0

Sources of funds 1,072 4,259 5,345 6,645 8,452

Intangible assets 30 88 82 86 91

Fixed assets 578 895 978 1,391 1,839

Less: Depn. and amort. 251 359 532 725 995

Net block 357 623 528 752 935

Capital WIP 3 0 0 0 0

Investments 1,568 4,858 6,257 7,383 9,155

Def tax assets/- liability 9 -9 -18 -20 -22

Current assets 540 593 865 984 1,257

Inventories 0 0 0 0 0

Sundry debtors 0 9 0 0 0

Cash & bank balances 237 239 370 392 538

Other current assets 40 27 35 35 35

Loans & advances 262 318 460 557 683

Current liabilities &

prov. 1,405 1,806 2,287 2,455 2,874

Current liabilities 1,392 1,787 2,103 2,187 2,522

Provisions and others 13 18 184 268 352

Net current assets -865 -1,213 -1,422 -1,471 -1,617

Others (net) 0 0 0 0 0

Application of funds 1,072 4,259 5,345 6,645 8,452


Cash flow statement (` mn)


Reported net profit 506 685 1,206 1,545 2,133

Depreciation and amort. 82 108 173 193 270

-Inc/dec in working cap. -5 14 14 22 26

Others 0 0 0 0 0

Cash from operations

(a) 583 807 1,393 1,760 2,428

-Inc/dec in investments -386 -3,290 -1,399 -1,126 -1,772

Capex -170 -371 -78 -417 -452

Others 400 335 326 49 267

Cash flow from inv. (b) -156 -3,325 -1,151 -1,495 -1,957

Inc/-dec in capital -387 2,502 42 0 0

Dividend+Tax thereon 0 0 -163 -245 -326

Inc/-dec in loans -1 0 0 0 0

Others 3 19 9 2 2

Financial cash flow ( c ) -386 2,521 -112 -243 -324

Inc/-dec in cash (a+b+c) 41 2 130 22 147

Opening cash balance 196 237 239 370 392

Closing cash balance 237 239 370 392 538


Key Ratios


BV/Share (`) 20.7 63.9 76.2 94.7 120.5

ROIC (%) 63.5 28.2 26.8 27.5 30.1

ROE (%) 49.9 25.7 25.1 25.8 28.3

Net Debt/equity ratio (x) -1.7 -1.2 -1.2 -1.2 -1.1

Valuation ratios (x)

PER NA NA 94.5 73.8 53.4

PBV 78.7 25.4 21.3 17.2 13.5

EV/EBITDA NA NA 75.5 58.8 40.1

EV/Sales 31.5 28.4 23.3 17.6 13.6

Turnover ratios (no.)

Debtor days 0 1 0 0 0

Inventory days 0 0 0 0 0

Creditor days NA NA NA NA NA




JM Financial Institutional Securities Limited

(Formerly known as JM Financial Institutional Securities Private Limited)

Corporate Identity Number: U65192MH1995PLC092522

Member, BSE Limited and National Stock Exchange of India Limited

SEBI Registration Nos.: BSE - INB011296630 & INF011296630, NSE - INB231296634 & INF231296634

Registered Office: 7th Floor, Cnergy, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India.

Board: +9122 6630 3030 | Fax: +91 22 6630 3488 | Email: [email protected] | www.jmfl.com

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No part of his or her or their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

I.

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III.

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JM Financial-eRr Groups-Just Dial-Strong Operating Metrics