23 May 2016

4QFY16 Results Update | Sector: Technology

Just Dial

BSE SENSEX
25,230
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)

S&P CNX
7,731
JUST IN
69.5
48.8 / 0.7
1294 / 378
-17/-22/-29
1285
67.5

CMP: INR702

Buy

4QFY16 results in line; Margins to decline in FY17/18

Financials & Valuations (INR b)

Y/E Mar
2016 2017E 2018E
Net Sales
6.9
8.3
10.0
EBITDA
1.7
1.5
2.0
PAT
1.4
1.2
1.6
EPS (INR)
20.4
17.2
22.9
Gr. (%)
3.7
-16.0 33.6
BV/Sh (INR)
96.7 111.5 131.5
RoE (%)
21.1
16.5
18.9
RoCE (%)
21.1
16.5
18.9
P/E (x)
36.0
42.9
32.1
P/BV (x)
7.6
6.6
5.6

Estimate change
TP change
Rating change

TP: INR802(+14%)

4QFY16 results in line with expectations: Just Dials (JUST) revenue grew by
15% YoY to INR1,796m (vs. our estimate of INR1,828m), with paid campaigns
up by 11.3% YoY and 4% QoQ to 368,800nos. EBITDA grew by 6% YoY to
INR450m (vs. our estimate of INR457m) while EBITDA margin declined by
200bp YoY to 25.1% (vs. our estimate of 25%), driven by an increase of 330bp
in other expenses. Consequently, PAT de-grew by 25% YoY to INR353m (vs. our
estimate of INR323m). The revenue included set up fees of INR36.6m from JD
OMNI which has a negligible cost associated with it.
Employee addition and aggressive advertising to drive growth, but hit
margins: In order to revive growth in the listing business and drive growth in
the Search plus business, the company added 944 sales personnel in 4QFY16
and plans to add another ~2,000 sales employees in FY17, which is likely to
drive a revival in growth from 3QFY17, with new features in Search plus further
contributing to the growth. JD Omni plans to aggressively spend on advertising
(INR650m in FY17 and INR400m-INR450m in FY18), mainly for the Search plus
business, which will result in EBITDA margin declining by 770bp to 17% in FY17,
but recovering to 19.5% in FY18.
Targeting 25-30k JD Omni customers in FY17: JD Omni clocked 2,500
customers in 4QFY16 (launched on Feb-25) and revenue of INR36.6m. JD Omni
plans to achieve a customer base of 25-30k in FY17, out of which 70% are
expected to opt for the rental model and 30% for the outright purchase model.
However, there is need for more clarity on the accounting part of the upfront
fees for which the management is in active discussions with consultants.
Valuation and view: We had already factored in the high advertising expenses
in our FY17 estimates and are now accounting for the same in our FY18
estimates as well. Hence, we are lowering our EPS estimate for FY18 by 15%
due to the expected decline in EBITDA margin over FY16-18E. We expect
revenue CAGR of 20% and PAT CAGR of 6% over FY16-18E. Maintain Buy with a
TP of INR802, thus valuing the stock at 35x FY18E EPS.

Niket Shah (Niket.Shah@MotilalOswal.com); +91 22 39825426

Chintan Modi (Chintan.Modi@MotilalOswal.com); +912239825422/Kaustubh Kale (Kaustubh.Kale@MotilalOswal.com); +912230102498

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Just Dial

Results in-line with expectations

Just Dials (JUST) revenue grew 15% YoY to INR1,796m (est. INR1,828m) as
against INR1,563m in 4QFY15.
Paid campaigns as of end of 4QFY16 stood at 368,800 as against 331,200
campaigns in 4QFY15 (11% growth YoY) and 354,900 campaigns in 3QFY16 (4%
growth QoQ).
EBITDA grew 6% YoY from INR424m in 4QFY15 to INR450m in 4QFY16
(est.INR457m). EBITDA margins declined from 27.1% in 4QFY15 to 25.1% (est.
25%) in 4QFY16 on account of higher other expenses of 330bp. Expenses as a
proportion of revenues were higher on account of slower growth.
Consequently, PAT de-grew by 25% YoY and stood at INR353m in 4QFY16 (est.
INR323m).
As of 4QFY16 company database consisted of approximately 16.2m listings as
compared to 15m listings as of 4QFY15, representing a Y-o-Y growth of 9%,
16.1m as of 3QFY16.
The Company currently has 30 search plus services live on the platform.
The revenue included set up fees of INR36.6m from JD OMNI which is has
neglible cost associated with it.

Exhibit 1: Revenue trend

29

26

26

31

29

29

26

25

1,686

1,713
2QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

1,350 1,474 1,544

1,046 1,127 1,199 1,242
1,563

1QFY16

16

15

11

1,713 1,796
4QFY16

28

YoY Growth (%)

3QFY16

Total Revenues (INR m)

Source: MOSL, Company

Exhibit 3: PAT trend

Source: MOSL, Company

23 May 2016

280 287 298 341

38
0

10

47
18

270

281 315 321 472 332 464

353
-25

-16
4QFY16

4QFY16

3QFY16

2QFY16

1QFY16

4QFY15

3QFY15

2QFY15

1QFY15

4QFY14

3QFY14

2QFY14

1QFY14

501 424 484

397 374 450
363 352 333 374 340 426

60

3QFY16

25

86

2QFY16

22

85

1QFY16

23

69

YoY Growth (%)

3QFY15

27

29

2QFY15

32

1QFY15

25

29

4QFY14

28

30

3QFY14

31

2QFY14

35

PAT (INR m)

EBITDA margins (%)

1QFY14

EBITDA (INR m)

4QFY15

Exhibit 2: EBITDA trend

Source: MOSL, Company

Just Dial

Employee addition and aggressive advt. spends to drive growth but will hit
margins hard:

Management highlighted slowdown in new campaign additions is due to lack of

emphasis on augmenting the sales force which had impacted 2QFY16 and
3QFY16 performance as well.
They have initiated to address the issue by adding close to 944 employees in the
sales team in 4QFY16 and will add ~2,000 employees in FY17.
This shall lead to growth revival from 3QFY17 while new features in Search plus
to further aid growth.
JD plans to aggressively spend on advertisement (INR650m in FY17 and INR400450m in FY18) mainly towards Search plus business which will lead to EBITDA
margin decline of 770bp to 17% in FY17, while FY18 to see recovery to 19.5%.

JD Omni and improved Search Plus to be launched in February 2016:

Company plans to have a product launch of the improved version of Search Plus
and JD Omni in February 2016, kicking off the ad campaigns to increase user
engagement through mass communication (spending INR1b over four quarters).
JD Omni and Search Plus will be synergistic with the existing Search business by
transacting, managing vendors inventory, logistics and providing him with a
domain.
Search Plus has started contributing to revenues through affiliate transactions,
though it is a miniscule portion currently.

Targeting 25-30k JD Omni customers in FY17:

JD Omni achieved 2,500 customers in 4QFY16 (launched on 25th feb) clocking in

revenue of INR36.6m.
JD intends to achieve a customer base of 25-30k in FY17 with 70% expected to
opt for a rental model and 30% for outright purchase model.
However, the accounting part of upfront fees needs clarity where management
is in active discussion with consultants.

Valuation and view

We value JUST at 35x FY18E EPS, which we believe is justified considering:
High entry barriers ensure limited competition
JUST is the leader in Indias local search business and enjoys a strong first-mover
advantage. It has a database of 16.1m listings spread across ~2,000 Indian cities as
on 3QFY16, significantly ahead of competitors. We believe the biggest strength of
JUST is maintenance of its database by keeping it updated and accurate through unparalleled feet-on-street strength (~9,500 employees as of FY15), its ability to
develop direct and personal relationships with SMEs and its unique voice-based
search infrastructure, which is difficult to replicate by competitors.
Strong growth potential for Indias local search business
We believe JUST has significant growth potential as at 16.1m listings, it has still
tapped less than 50% of the Indias overall base of 32m SMEs. Further, opportunity
in terms of monetization is huge given only 2% of JUSTs listings are paid listings, and
less than 1% of Indias SME base of 32m small businesses are paid advertisers on its
platform. JUSTs proprietary pricing algorithms to set the price range for various

23 May 2016

Just Dial

membership packages depending on the keyword and locality as well as its unique
mechanism of offering monthly/weekly payment packages ensure high affordability
for SMEs which should drive higher monetization going forward.
Search Plus, a game changer Synergistic move, from search to transactions
JUST has extended its offerings from search to transactions with launch of a host of
services under the JD Search Plus platform. JUST currently has 27 products under
Search Plus which includes online food delivery, groceries, wine delivery, doctors
appointments, taxi bookings, online purchases of electronics, etc. Further, JUST is
launching a plethora of new products like Just Dial Guaranteed, Just Dial Cash,
Online cab booking, etc which we believe will take the Search Plus platform to a
completely different league. Management plans to aggressively advertise to create a
viral impact for these recent launches. We believe given strong relationships
enjoyed by JUST with SMEs, it is best placed to capture the off-line to on-line ecommerce opportunity with its foray into enabling transactions on its platform.
Exhibit 4: Price to earnings (one year forward)

Source: MOSL, Company

23 May 2016

Exhibit 5: Price to book (one year forward)

Source: MOSL, Company

We value the stock at 35x FY18E EPS and arrive at a target price of INR802.
Maintain Buy rating.

Just Dial

Story in charts
Exhibit 6: Total number of business listings

Exhibit 7: Paid campaigns as a % of total listings

No of business listings (m)

No of campaigns (in 000s)

Paid campaigns as % of total listings

15.0

6.0

4.5

7.2

9.1

16.3

17.9

19.7
2.0

11.8

2.4

2.3

2.2

2.2

2.3

2.3

2.4

418

481

1.4

FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E

62

120

171

207

262

331

369

FY10

FY11

FY12

FY13

FY14

FY15

FY16 FY17E FY18E

Source: MOSL, Company

Exhibit 8: Premium listing continue to rise

Number of campaigns (in 000s)

Source: MOSL, Company

Exhibit 9: Average realization per campaign to moderate

Avg. realization per campaign per year (INR)

Premium listings %

Growth%

21.0

FY13

FY14

FY15

FY14

FY15

FY16E

FY17E

FY10

FY11

Exhibit 11: JUST has a robust cash generating business

model
CFO (INR m)

8.6

FY14

1,023
957
726
662

3.2

FY15

FY16E

FY17E

Source: MOSL, Company

Free cash flows (INR m)

2,611
2,211
2,160
1,760

2,171

5.3
2.0

FY16 FY17E FY18E

Source: MOSL, Company

India's e-commerce market for physical goods (USD b)

23 May 2016

0.5

-21.1

Exhibit 10: Search Plus to drive e-commerce sales for JUST

FY13

-0.5

19,633

FY12

19,633

-11.1

Source: MOSL, Company

0.8

-1.2

19,535

1.0
19,880

17,999

20,246

380

2.4
19,686

FY13

331

455

6.8
19,219

207

261

25

25,668

22

23

24

26

FY12

FY13

1,330
1,121

FY14

1,422
1,165 1,110

FY15

FY16E

FY17E

FY18E

Source: MOSL, Company

Just Dial

Key assumptions
Exhibit 12: Annual metrics
Particulars
No of business listings (m)
No of campaigns
Paid campaigns as % of total listings
Average realization per campaign per year (INR)
Growth YoY
Listings growth YoY
Campaign growth YoY
Average realization growth (YoY)

FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17E
FY18E
4.5
6.0
7.2
9.1
11.8
15.0
16.3
17.9
19.7
61,500 120,200 171,000 206,500 262,150 331,200 368,800 417,769 481,241
1.4%
2.0%
2.4%
2.3%
2.2%
2.2%
2.3%
2.3%
2.4%
25,668 20,246 17,999 19,219 19,686 19,880 19,633 19,535 19,633
0.0%
51.9%
21.0%

33.3%
95.4%
-21.1%

20.0%
42.3%
-11.1%

26.4%
20.8%
6.8%

29.7%
26.9%
2.4%

27.1%
26.3%
1.0%

8.7%
11.4%
-1.2%

10.0%
13.3%
-0.5%

10.0%
15.2%
0.5%

Source: Company, MOSL

Exhibit 13: Quarterly metrics

1QFY15

2QFY15

3QFY15

4QFY15

1QFY16

2QFY16

3QFY16

4QFY16

14.2

14.5

14.7

15.0

15.3

15.8

16.1

16.3

Paid Campaigns (in 000s)

Paid Campaigns as a proportion of total
campaigns
Total Campaigns (YoY)

278.0

296.1

312.8

331.2

346.9

349.8

354.9

368.8

2.0%

2.0%

2.1%

2.2%

2.3%

2.2%

2.2%

2.3%

49%

44%

36%

27%

8%

9%

10%

9%

Paid Campaigns (YoY)

25.5%

24.1%

25.3%

26.3%

24.8%

18.1%

13.5%

11.4%

Total Campaigns (m)

Source: Company, MOSL

23 May 2016

Just Dial

Financials and Valuations

Income Statement

Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT

2011
1,839
40.5
454
24.7
68
386

2012
2,621
42.5
672
25.7
90
582

2013
3,628
38.4
1,007
27.8
144
863

2014
4,613
27.2
1,422
30.8
173
1,249

2015
5,898
27.9
1,657
28.1
241
1,416

2016
6,908
17.1
1,706
24.7
311
1,395

2017E
8,320
20.4
1,456
17.5
397
1,059

0
37
0
423
128
30.2
0
295
295
22.7

0
132
0
713
209
29.3
0
504
504
70.7

0
136
-15
984
300
30.4
0
685
700
38.8

0
399
0
1,649
442
26.8
0
1,206
1,206
72.3

0
489
0
1,904
516
27.1
0
1,388
1,388
15.1

0
585
0
1,980
561
28.4
0
1,419
1,419
2.2

0
643
0
1,702
511
30.0
0
1,191
1,191
-16.0

Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments

2011
521
433
954
1
-12
943
441
170
272
0
1,182

2012
531
542
1,072
0
-9
1,063
600
251
348
12
1,568

2013
695
3,564
4,259
0
9
4,269
995
388
608
16
4,858

2014
702
4,643
5,344
0
18
5,363
1,080
552
528
0
6,257

2015
705
6,029
6,733
0
-24
6,710
1,706
785
922
0
7,722

2016
695
6,021
6,716
0
-7
6,708
2,484
1,096
1,388
0
7,031

2017E
695
7,051
7,746
0
-7
7,739
2,884
1,493
1,391
0
7,031

Current Assets
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets

448
1
196
251
959
938
21
-511
943

540
0
237
303
1,404
1,391
13
-864
1,065

593
9
239
345
1,806
1,787
18
-1,213
4,269

865
0
370
495
2,287
2,103
184
-1,422
5,363

979
1
422
556
2,912
2,703
209
-1,933
6,710

1,147
1
337
809
2,857
2,807
51
-1,710
6,708

2,907
1
1,935
971
3,590
3,237
353
-683
7,739

Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)

Balance Sheet

23 May 2016

(INR Million)
2018E
9,980
20.0
1,996
20.0
463
1,533
0
740
0
2,273
682
30.0
0
1,591
1,591
33.6

(INR Million)
2018E
695
8,441
9,136
0
-7
9,129
3,284
1,955
1,328
0
7,031
5,111
2
3,945
1,165
4,342
3,883
459
770
9,129

Just Dial

Financials and Valuations

Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Cash P/E
Price / Book Value
EV/Sales
EV/EBITDA
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Asset Turnover (x)
Working Capital (Days)
Fixed Asset Turnover (x)
Leverage Ratios (%)
Net Debt/Equity (x)

Cash Flow Statement

Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance

23 May 2016

2011

2012

2013

2014

2015

2016

2017E

2018E

5.7
7.0
15.2
0.0
0.0

9.5
11.2
16.5
0.0
0.0

10.1
12.1
61.3
0.0
0.0

17.2
19.7
76.2
2.6
13.6

19.7
23.1
95.5
2.7
12.2

20.4
24.9
96.7
0.0
0.0

17.2
22.9
111.5
2.6
13.5

22.9
29.6
131.5
3.3
12.7

42.8
37.4
9.7
9.7
36.0
0.4

37.3
31.8
7.7
7.4
30.9
0.4

36.0
29.5
7.6
6.4
30.0
0.0

42.9
32.2
6.6
5.1
34.1
0.4

32.1
24.9
5.6
4.1
23.9
0.4

36.8
36.7
-78.2

49.8
49.7
-70.5

26.3
26.1
-75.6

25.1
25.1
-86.7

23.0
23.0
-77.2

21.1
21.1
-97.0

16.5
16.5
-79.2

18.9
18.9
-70.2

1.9
-140
4.2

2.4
-154
4.4

0.8
-146
3.6

0.9
-142
4.3

0.9
-146
3.5

1.0
-108
2.8

1.1
-115
2.9

1.1
-116
3.0

-1.4

-1.7

-1.2

-1.2

-1.2

-1.1

-1.2

-1.2

2011
454
37
256
-133
-13
601
-176
425
-377
45
-508
1
-2
0
-11
-12
82
114
196

2012
672
131
444
-209
-82
957
-231
727
-1,091
112
-1,209
293
-2
0
2
293
41
196
237

2013
1,007
121
314
-307
-112
1,023
-361
662
-3,188
14
-3,535
2,513
-1
0
2
2,514
2
237
239

2014
1,422
399
327
-433
-386
1,330
-208
1,122
-1,051
18
-1,241
41
0
0
0
41
130
239
370

2015
1,657
490
585
-560
-327
1,844
-680
1,165
-899
-7
-1,585
23
0
0
-230
-207
52
370
422

2016
1,706
585
-308
-561
466
1,888
-778
1,110
450
0
-328
-1,645
0
0
0
-1,645
-85
422
336

2017E
1,456
643
571
-511
0
2,160
-400
1,760
0
0
-400
0
0
0
-161
-161
1,598
337
1,935

(INR Million)
2018E
1,996
740
557
-682
0
2,611
-400
2,211
0
0
-400
0
0
0
-201
-201
2,010
1,935
3,945

Just Dial

Corporate profile

Exhibit 1: Sensex rebased

Company description

Just Dial Ltd (JUST) is one of the leading local search

engines in India. It provides users with information and
user reviews from its database of local businesses,
products and services across India. Its search service is
available to users through multiple platforms: Internet,
mobile Internet, telephone (voice) and text (SMS). JDL is
a well known and established brand on the Internet and
through its easy to remember phone numbers (88888
88888 and 6999 9999) and user friendly mobile phone
interface, it attained significant mind share with users for
their local search needs.

Exhibit 2: Shareholding pattern (%)

Source: MOSL/Bloomberg

Exhibit 3: Top holders

% Holding

Holder Name

Mar-16

Dec-15

Mar-15

Promoter

32.6

32.6

32.9

Saif II Mauritius Company Ltd.

8.6

DII

22.4

6.6

4.7

Nalanda India Equity Fund Ltd.

6.9

FII

39.6

36.1

27.4

4.3

Others

5.4

24.8

35.0

SCI Growth Investments II

Sequia Capital India Growth Investment
Holdings I

Note: FII Includes depository receipts

Source: Capitaline

4.3

Amansa Holdings Pvt Ltd.

2.9
Source: Capitaline

Exhibit 4: Top management

Name

Exhibit 5: Directors
Designation

Name

Name

Venkatachalam Sthanu Subramani

Managing Director

Anand Balasundaram

Malcolm Monteiro

Sachin Jain

Company Secretary

Ramani Iyer

Ravi Chandra Adusumalli

Sanjay Bahadur

Shailendra Jit Singh

Venkata Challam Krishnan

Source: Capitaline

Exhibit 7: MOSL forecast v/s consensus

Exhibit 6: Auditors
Name

*Independent

Type

S R Batliboi & Associates LLP

Statutory

V B Kondalkar & Associates

Secretarial Audit

EPS
(INR)

MOSL
forecast

Consensus
forecast

FY16

20.4

20.1

1.7

FY17

17.2

19.7

-12.8

FY18

22.9

30.0

-23.8

Variation (%)

Source: Bloomberg
Source: Capitaline

23 May 2016

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NOTES

23 May 2016

11

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