justdial initiating coverage_280613
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Your success is our success
Emkay
Initiating
Coverage
Emkay Global Financial Services Ltd. 1
Financial Snapshot (Consolidated) (Rsmn)
YE- Net EBITDA EPS EPS RoE EV/
Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV
FY12A 2,621 673 25.7 523 7.5 81.1 52.5 83.0 61.8 40.9
FY13E 3,636 1,000 27.5 703 10.1 34.6 25.9 61.7 38.1 9.9
FY14E 4,583 1,377 30.1 989 14.2 40.6 21.2 43.9 27.0 8.8
FY15E 5,962 1,996 33.5 1,370 19.7 38.5 26.2 31.7 18.1 7.9
Justdial Ltd.
Still room to dial in
June 28, 2013
Rating
Accumulate
CMP
Rs629
Target Price
Rs700
EPS Chg FY14E/FY15E (%) NA
Target Price change (%) NA
Nifty 5,682
Sensex 18,876
Relative price chart
500
535
570
605
640
675
Jun-13 Jun-13 Jun-13 Jun-13 Jun-13 Jun-13 Jun-13 Jun-13
Rs
10
14
18
22
26
30%
Just dial ltd (LHS) Rel to Nifty (RHS) Source: Bloomberg
Stock DetailsSector Others
Bloomberg JUST.IB
Equity Capital (Rs mn) 698
Face Value(Rs) 10
No of shares o/s (mn) 69.8
52 Week H/L 684/ 581
Market Cap (Rs bn/USD mn) 44/ 730
Shareholding Pattern (%)
Promoters
33%Pre-IPO
Investors
40%
Public
25%
Employees
2%
Source: Bloomberg
Tejas Sheth
+91-22-66242482
n JDs strong brand recall, high business understanding, far
superior services and path-breaking product pipeline make it
a strong enabler for growing B2C local commerce in India
n With high operating leverage, negative working capital, low
capex-driven model and cash-rich b/s, JDs profitability and
cash generation potential are at a higher rate with growth
n Pre-empting the new medium, changing users perception
towards JD and data sharing, fruition of vertical-specific
search engines are the key challenges to JDs growth
n Initiate coverage with Accumulate rating and a TP of Rs 700.
Valued JD at 3% yield on FY15E FCF of Rs1.4bn. At the TP,
JD would trade at P/E of 35x and P/B of 7.7x on FY15E
Online classified industry expected to grow at 26% (CAGR) till 2016 - JustDial has what it takes to capitalize on it
Established in 1996, Just Dial (JD) is a pioneer of B2C local commerce in India on digital
media. With the digital classified industry estimated to grow at a CAGR of 26% to
Rs39bn by 2016, JD is evidently well equipped to seize the growth opportunity, thanks to
its strong brand recall, diverse data content, presence across three platforms, superior
user-interface and path-breaking product pipeline. It is in the forefront of the online
classified industry, which has evolved from Search to Assist, and now
metamorphosing into Suggest mode. While Search and Assist have been JDs forte,
Suggest is still at the users end. To change user perception about JD from being a
mere search engine to a data-sharing platform would be a challenge.
JD growth is driven by Usage, which is driven by User experience,
technology and improving user lifestyle. Paid listing is a derivative
Evidently, JD earns its revenue from paid listing of vendors. But its revenue growth may
be mainly attributed to usage/search traffic across its three platforms. An increase in
usage enhances business potential of vendors, who, in turn, pay for the listing. We
expect the usage to scale up considering the increasing user-base because of high
penetration and growing usage/users. Penetration and frequency will increase with
enhancement of user experience, technology to access usage will become cheaper, and
improving user lifestyle will lead greater necessity for local search. Perceptibly,
vertical/domain-specific local search sites will be a major threat to usage growth.
Initiate coverage with TP of Rs 700, upside of 16% from CMP
JDs free cash flow to firm (FCFF) will grow at a much higher rate than its topline growth
considering high operating leverage, negative working capital and low capex. Going
forward, working capital days will increase with the company moving to lower durations
of contract, though it will continue to remain negative. We value JD on an FCF yield
basis, assigning 3% to FCFF of Rs 1.45bn in FY15E, leading to a TP of Rs 700. At the
TP, the stock would trade at P/E of 35x on FY15E and will derive 86% of fair-value from
terminal value. In comparison to listed peers, on a similar business model and some
consumer companies with a similar financial model, the valuation looks reasonable.
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Just Dial From Search Engine to Enabler of Local Commerce
The local commerce industry may be broadly classified into segments, which are defined
by the two transacting parties: Business-to-Business (B2B), Business-to-Consumer (B2C)
and Consumer-to-Consumer (C2C). A commercial transaction is effected through three
parties: buyer, vendor and enabler. Essentially, enablers are brokers, newspapers,
magazines and yellow pages. In digital media, voice platform, websites and mobile appsdeveloped to connect a buyer and a vendor. The enabler on digital media enables a
transaction by providing a common platform, wherein: a) vendors connect with buyers, b)
buyers can interact with other buyers to have a view on vendors as well as their products,
c) avail of various other options of a vendor.
JD is a B2C digital medium enabler of local commerce. The B2C segment can be further
categorized domain-wise into: travel, entertainment, apparels, jobs, marriage, dating, etc.
While JD is a general B2C enabler, most of its peers are domain-specific, for example,
Naukri.com (Job), Zomato.com (restaurants), and 99acres.com (real estate).
Vendors generate their revenue mainly from transaction fees and margins on products sold
through their websites. On the other hand, enablers revenue is generated through vendor
charging them a listing fee and for advertisement banners, both are part of the classified
industry. Some enablers such as LinkedIn also generate revenue from buyers for availing
of quick access to the premium listing of sellers.
Netscribes, a renowned digital world research agency, has estimated the classifieds
market in India at Rs 30bn in 2011, which is expected grow to Rs 84bn by 2016. Of
this, the online medium, which had a share of 41% in 2011, is forecasted to grow to
47% in 2016. To put things in perspective, the potential market for JD would increase
from Rs12.3bn in 2011 to Rs39.4bn in 5 years, clocking a CAGR of 26%.
Exhibit 1: Broad Categorization of Local E-Commerce Industry with some examples
Source: Emkay Research
Local E-Commerce
Enabler
Just Dial
Naukri
TripAdvisor
Linkedin
Shaadi
B2C
Vendor
MakemyTrip
Flipkart
Groupon
Companies
Captive Sites
Amazon
Enabler
B2B
Vendor
IndiaMart
TradeIndia
None
Enabler Vendor
OLX Ebay
C2C
Quikr
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Just Dial service offering is far superior to competitors
JD competes with newspapers, online B2C general classified websites and Google. While
newspaper is a conventional medium, with pages dedicated to classifieds, the digital
medium has dedicated websites and mobile apps. Arguably, Google, the search engine, is
the biggest enabler of digital commerce globally, as it enables or rather directs the user to
local enablers and vendors platform.
On the conventional side, JD competes with all daily newspapers, while on the digital front
it competes with askme.com and asklaila.com. With Google, JD competes with its two
platforms: Google Places and Google Adwords. Google Places is a platform that allows
vendors to post free listings, while Google Adwords is where vendors pay for getting top
listings during the search. JDs offering is superior across the parameters and largely
benefits to users/consumers and vendors.
JDs pricing methodology is much more dynamic than print media, as it considers the type
of business and location. Hence, for example, it factors in that a dentist in a city centre
would be charged more than the one on the outskirts of the city or a restaurant service in
the city centre would be charged more than a garage in the similar location. On the other
hand, print media differ on the size of the listing and location, which are more city-specific,
rather than on micro-locations in a city. Google Adwords differentiates the pricing on
multiple parameters, which are high algorithm driven. It charges a customer based on per
click or per impression and the vendor could also choose a particular hour for its search
listing.
On a user interface basis, JDs search results are much more objective and have
comparable vendor parameters of ratings, pricing and location photos vis--vis Google
Adwords.
Exhibit 2: Service offering Comparison
Just Dial Print Classifieds Google Adwords Comments
Pricing
Free Listing Yes No Yes Free listing on JD and Google Places
Pricing ParametersBusiness Type,
Location, Days
Size, Location,
DaysMultiple, Hourly
JD has better pricing methodology than print
media, while Googles pricing methodology is
much more dynamic
Pricing / eyeball - Relative Low High Not measurable
Consumer Benefits
Search Outcome Diverse & Highly Objective Only Paid listingsDiverse & Less
Objective
Vendor Ratings Yes No NoUser can be aware of past experience of other
users
Vendor Pricing Comparison Yes No No User can compare vendors' pricing
Photos Yes No NoUser can be aware of ambience & interiors of
vendors' service area
Accessibility High Low MediumBuyers can access information on Voice
platform, which is missing in Google Adwords
Connecting the Vendor Yes No No Users can avail vendors connecting them
Location Direction Yes No YesVendors' location can be looked through pre-
directed maps
Paying Vendor Benefits
User Accessibility Yes No NoJD shares users search trail with vendor in
Voice as well as web (users choice) platforms
Source: Industry, Company, Emkay Research
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JDs service platform and content base are diverse, up-to-date and way ahead of
competition; User experience on JDs local search service is unmatched
According to estimates, in FY13 JDs business listings were at 9.1mn, with accessibility
across three platforms: voice, web and mobile. The company has a presence in most cities
and towns of India, with hotline facilities in nearly 250 cities and towns.
Askme is the closest competitor considering its presence across the three platforms. But in
terms of website rankings by alexa.com, no other local search engine is big enough to be
JDs competitor. We believe the kind of legacy JD has built in more than 17 years of
existence and top-of-the-mind brand recall, no competition can be a threat. While we are
not aware of the listing data of askme and asklaila, we firmly believe that they are way
behind.
Exhibit 3: Listing content with accuracy is key to users revisit
5.87.2
9.1
0
2
4
6
8
10
FY11 FY12 FY13
Source: Company, Emkay Research
Exhibit 4: Justdial is superior among the online classifieds peers
Parameters Justdial burrp askme asklaila
Since 1996 2006 na 2007
Voice Yes No Yes No
Web Yes Yes Yes Yes
Mobile App Yes Yes Yes No
alexa.com Ranking 36 409 878 149
Source: Company, Emkay Research
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Users and Usage are revenue growth drivers, not paid listings
JD, part of the local commerce industry, enables B2C transactions through its search
engine developed on voice, web and mobile app.
JD earns its revenue by charging premium listing fees from its clients. The clients would
pay only when there is strong user traffic on JDs platform for inquiries, which can help
them to convert the same into business. JDs revenue model factors in one single variable:
the number of searches done across the platform. Hence, higher searches would lead to
higher potential business for clients, which, in turn, should further lead to an increase in
premium listings and/or rise in average listing fees.
A simple comparison of this model is with a mall space leaser. The leaser will get more
lessees and also more rentals from lessees if it gets more footfalls in its malls.
Exhibit 5: Increase in Usage will increase the number of Paid Listings of Average charges / listing
Source: Emkay Research
Also, with increase in JDs user-base and usage frequency, the marginal cost of acquiring
premium listings would decrease, as clients themselves would want to part be of the
premium listings.
Evidently, JD needs to increase this user-base and penetrate deeper, besides increasing
the number of average usages/users. The same could be achieved through Internet factors
such as enhancing user experience, and through external factors such as improvement in
user (current and target) lifestyle and newer data access platforms.
Exhibit 6: Factors which can increase Usage leading to increase in JDs revenue
Source: Emkay Research
INCREASE IN
USAGE
Increase in
User Base
Enhancing User
ExperienceImprovement in
Users Lifestyle
Improving User
Access
Increase in
Usage / User
Improvement in
EconomySize & Accuracy of
the data / contentSharing / Suggest Increase in internet &
Smart phone Usage
Increase
in Potential
Business
Increase
in Usage
Increase
in Paid
Listing
Increase
in JDs
Revenue
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Understanding the User-base and Usage/User
JDs 93% revenue accrues from top 11 cities, while 44% revenue from NCR and MMR.
This data does show that the companys revenue model is an urban phenomenon.
As per Census 2011, top 11 cities, where JD has a strong presence, have a total
population of 78mn. MMR and NCR have a population of 15mn each. Of the 78mn
population, the addressable market (age 15-55) for JD would be around 45mn taking intoaccount 58% of Indias population falls in this age category. For MMR and NCR, the
combined addressable market would be 18mn.
We believe that JDs platform is accessed by around 19mn unique users across India, of
which top 11 cities should have about 17mn users. On this user-base, the company has
penetrated around 38% of the total addressable market in top 11 cities of its
presence.The addressable market has increased from 27mn in 1991 to 36mn in 2001 to
45mn in 2011, a growth of 32% in 2001 and 27% in 2011. Assuming a growth of 10% by
2016, the addressable user market would be 50mn.
Exhibit 7: JD has penetrated 38% of its user base in top 11 cities of its operation
Source: Company, Census Data, Emkay Research
As on 9MFY13, 227mn searches/usages were done across three platforms of service
delivery. Assuming there is no seasonality in usage, the total usages would be around
303mn in FY13 (annualised). Nearly 90% (since 93% revenue is contributed) of usages
would have been done in top 11 cities, leading to total usages of 273mn in these cities.
On a unique user-base of 17mn in the top 11 cities, the average usage/user annually would
be 16 times. Over the last 3 years, the usage in top 11 cities has increased from 163mn to
273mn in these top 11 cities. This, we believe, would be mainly driven by the average
usage/user, which as per our estimation has increased from 10 in FY11 to 16 in FY13E.
Exhibit 8: As per our estimation, average usage/user has increased from 10 to 16 in 2 years
0
75
150
225
300
FY11 FY12 FY13E
0
2468
1012
1416
18
Usage in top 11 cities Usage / user (RHS) Source: Company, Emkay Research
Population in Top 11
cities of JDs
presence
78mn
58% of Population
in Top 11 cities of
JDs presence in
15-55 years age
bracket
45mn
Unique Users
in top 11
cities on JDs
platform
17mn
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Technology will enable better access and engage the user
As per our estimates, the user, on an average, searches online 16 times in a year. The
average over the years has improved and will continue to grow with better engagements.
The user would be mainly engaged to use JDs services due to two factors: a) technology
improves access to JDs data through multiple platforms, and b) user experience improves.
Technology plays a pivotal role in engaging the user and hence increases the usage/usersas well as broadens the user-base. Along with voice platform (JDs service delivery
platform is available on web and mobile), the access will also improve. Over the last 6
years, the usage has improved substantially, especially on these two new platforms. Going
forward, as the penetration of internet (on PC and mobile) improves, usage of JDs services
will continue to increase. Some of the recent surveys highlight how the Internet and smart
phone will penetrate in India over next some years.
As per a Neilson survey, India has 900mn cell phone users, of which 40mn aresmart phone users in urban areas (towns with more than a 0.1mn population); 24mn
smart phone users use it for running online searches.
As per the IDC Worldwide Quarterly Mobile Phone Tracker report of March 2013,Smart phone shipments to India are forecast to rise to 155.6mn units in 2017 from
the current 27.8mn, accounting for a 10.3% share of the global market behind the
projected 30.2% share of China and 12.1% of the US 12.1%.
As per Kleiner Perkins Caufield & Byers, India has 137mn Internet users as on2012, recording a 26% growth yoy. The population penetration rate for the Internet
usage in the country is at 11% at the end of 2012. China continues to have the
highest number of Internet users with 538mn users, adding 282mn users during
2008-12, with a population penetration rate of 40%.
According to Ciscos Visuals Networking Index (VNI) forecast (2012-17), there willbe 348mn Internet users in 2017, up from 138mn in 2012, CAGR of 44%. Portable
devices such as smart phones and tablets will contribute 40% to IP traffic in 2017
from 3% in 2012.
A report by Boston Consulting Group (BCG) says, the number of Internet users inIndia is expected to nearly triple from 125mn in 2011 to 330mn by 2016.
Voice-to-Internet: Pros and cons
JDs service delivery platform mix has moved from voice-based to internet-based, wherein
more and more users are availing of the information through website or mobile apps, rather
than calling the just dial # 88888888. The transformation has its own pros and cons
considering various factors such as costs, point of touch and user analytics, among others.
These changes will have a significant impact JDs business model, operations and,
eventually, on its financials. We believe this transition has more advantages than
disadvantages; JD has tried to address the disadvantages
Advantages of shift in usage platform from Voice-to-Internet; Internetplatform gives more diverse interaction opportunity
The Internet platform over voice platform upgrades the user search experience to a higher
and better level. The user, on the internet platform, can inquire not only about the
product/service/vendor, but also can view photos, expensive index, ratings of other users
and map of the location. This assists the user in decision-making pertaining to factors such
as cost, quality, location and ambience. All of these are totally absent on the voice platform.
The Internet platform takes the search service a notch higher from to Assist, which we
have mentioned in Exhibit 3.
High operating leverage
JDs 65% costs are fixed in nature, while 35% are linked to the topline. As the users
search platform mix moves from voice to internet-based, the blended cost of servicing
would deplete to a large extent. The company has to incur costs on infrastructure,
employee and administration to service voice searches, while for web and mobile apps the
costs are less variable in nature considering the platform is self-access.
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As the user base mix shifts from voice to web with absolute increase in visits, growth in
EBITDA would be at a higher rate than growth in revenue as seen also in the past.
Exhibit 10: Search/ Usage Trend and Mix
0
75
150
225
300
375
FY10 FY11 FY12 FY13E
Internet Mobile Internet Voice Source: Company, Emkay Research
Exhibit 11: EBITDA margins expands with higher web & app search
0%
9%
18%
27%
36%
FY08 FY09 FY10 FY11 FY12 FY13E FY14E FY15E
Source: Company, Emkay Research
Disadvantages of shift in usage platform from Voice-to-Internet;
Lead-to-inquiry ratio may falter, affecting the paid listing
In the voice platform, every inquiry by the user is a potential business for at least 3-5 paid
listing with whom the users requirements are shared along with the contact numbers. The
client would pursue the users for any business by contacting them.
Clearly, on the Internet platform, this is missing. The user may only check, if at all, with one
of the listings. Hence, every enquiry does not lead to potential business for more paid
listings. The inquiry would lead to potential business for only one client, rather than for 3-5
clients. The company has tried to address this issue by asking for contact details on the
web, but the user may not fill in the same. Thus, the internet platform usage for search over
voice may impact the lead generation for the paid listings, which may impact JDs growth.
JD has addressed this concern by a pop-up on the web, which prompts the user to fill in thecontacts details that is later shared with vendors. The only issue with this is that the user
has to fill in his details, which he may not always do, unlike in voice platform, where the
user does not have to put in any effort (Exhibit 18).
Competition on the Internet platform relatively higher than Voice platform
It is easy to replicate the internet platform, of being an enabler of local commerce, rather
than voice platform. As stated earlier, the voice platform requires higher capital mainly for
setting up of infrastructure as well as to finance running costs of data collation and client-
servicing. These costs are much lower on the Internet platform and hence call for lower
capital requirement for setting up a business.
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Better lifestyle adds to the need for JDs services
JDs service offering has direct linkage to Indias growth story, especially with the countrys
consumerism growth story. The improvement in economy leads to the following:
Higher consumer spending and hence a higher need for vendor details. Forexample, with better lifestyle peoples frequency towards restaurant increase,
leading to more inquiries for new restaurants in the city, or with better lifestyle
people tend to spend more on newer services such as spa and leisure tours.
Higher local travel for business and hence a higher need for vendors details at thedestination. For example, increased local travel leads to greater number of inquiries
for local taxi service, restaurants, etc.
Higher urbanization and job mobility and hence a higher need for local serviceproviders. For example, the packers-and-movers category has the highest share in
JDs revenue at around 2.5%.
All these parameters tend to increase the user base as well as usage/user, leading to
an increase in overall usage as well as overall business potential for vendor and hence
overall revenue for JD.
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The typical Indian consumer would want to have knowledge about vendors service, but
may not make efforts to share his own experience. Besides, JD is perceived as an
information-deriving platform by users, rather than an information-sharing platform. JD
faces two challenges here: to make the user share his experience, and if he does it, then it
has to be on the companys platform.
JDs voice platform comes as a respite in mitigating these challenges and provides an edge
over its competitors. Through its voice platform, JD prompts for ratings of the vendor that
the user has last inquired about. This helps the company to build its rating scale across
users, which in a form Suggests vendor services to users on web and mobile app
platforms.
Thus, if anyone in India could get the Suggest parameter of online classifieds, it would
evidently be JD. This would justifiably give the company a huge advantage over its
competitors.
Increase in Paid Listings result in to Crowding Effect
As paid listings increase, they result in a crowding effect, wherein the lead that was earlier
shared with x number of paid listings is not shared with x+y number of members at the
same time. This crowding effect reduces the probability of converting the lead into a
potential business, since the user does not have many vendors to approach. Moreover,
growing competition among paid listings provide pricing power to users.
Hence, with crowding effect, though the overall paid listing base would increase, the
average listing price would decrease to maintain vendors return on investment. This issue
would only be resolved by an increase in users and usage, which would result in higher
generation of leads and a better lead-to-vendor ratio.
JDs business model thrives on the fees paid by its members for getting business to their
doorstep. The client would not renew his listing subscription with the company if the
payback for listing fees is not justified. At present, 70% of paid listing members of 0.2msf
are the ones who have paid JD is the past. This clearly points to the fact that the return on
their investment (fees) is high, though 30% of members have not renewed their business
with JD.
Vertical specific search engines gaining momentum; JD misses out on
being general
In the local content search or local Enabler industry JD is in General category unlike most
of the other enablers are very vertical / domain specific for eg Naukri for Jobs, burrp for
restaurants & entertainment, etc. Many of these searches are moving on vendors platform
which sells third party product eg. bus services on redbus.in. If more and more of these
SME products and services get vertical-specific on the web then search for those will move
of JDs platform to those vertical-specific platforms. This will affect the usage traffic on JDs
platforms.
As per JDs management, going forward, there will be a too many apps for various service
offerings and hence people will be confused and would prefer a single app which will do allthe content search. Also, we believe that there are a lot of services which cannot have a
vertical-specific web platform like yoga classes, plumber, garage, doctor, courier services,
etc. For all these services search JD will remain the only touch point, although the
frequency of search traffic for them is lower than of restaurants or travel. JD has a
challenge to make convert and maintain search traffic towards these services to be
dependent for services which have vertical-specific search platforms.
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Working Capital (excl. cash) days will decrease
In FY12 and 9MFY13, JD had negative working capital on account of inadequate current
assets and high current liabilities because of higher customer advances. The company bills
and collects revenue in advance from paid-listings vendors before listings are advertised.
Earlier, the duration of contracts was longer than 90 days, but in order to boost paid-listing
members and revenue, JD has launched service contracts of duration as low as 1 week. At
present, 50% of paid-listing contracts are of 1-year tenure and the balance 50% of lower
than 1 year.
Most new listing contracts are of less than 1 year, since vendors would be looking for
benefits of their listings and would not wish to block capital in spite of lower pricing. Hence,
the company is foregoing the advances for revenue growth, which would results in lower
negative working capital days.
Over the next 2 years, growth in FCFE would be lower than that of PAT.
Exhibit 16: Negative Working Capital (excl. Cash) will deplete with Growth
-160
-150
-140
-130
FY10 FY11 FY12 FY13 E FY14 E FY15 E
Days
Source: Company, Emkay Research
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TP of Rs 700, Valued at 3% FCFF yield on FY15E
JDs model will generate cash from all areas with growth:
Due to high operating leverage, PAT growth would be higher than revenue growthAlthough customer advances will deplete, negative working capital would sustain and
hence generate cash Less capex-intensive business will ensure no dent in cash-flows High treasury income on growing cash balance, though not part of FCFFWe have valued JD on an FCFE yield basis, valuing the company at a yield rate of 3% on
FCFF estimate of Rs 1.45bn in FY15. At the TP of Rs700, the P/E for FY15E comes to 35x
and derived terminal value at 86% of the total estimated value.
Exhibit 17: FCFF Trend (Rs mn)
237420
678 703
1044
1454
0
500
1000
1500
2000
FY10 FY11 FY12 FY13 E FY14 E FY15 E
Source: Emkay Research
Exhibit 18: Valuation Break-up at TP
86%
9%
5%
Net Assets Free Cash (FY2014-15) Terminal Value Source: Emkay Research
Peer comparison
We have compared JDs valuations on two categories: the companies that have a similar
business model in India and the US, and the companies that have a similar financial modeland valuation. This means in the listed space, the two closest comparable peers to JD are
Yelp Inc. and Info Edge Ltd. While the former is a US-based NYSE-listed content search
service provider, the latter is an India-based listed player that makes money from operating
sites such as naukri.com, jeevansathi.com, 99acres.com and shiksha.com, among others.
Yelp is the closest comparable in terms of business, while in India, Info Edge, part of the
classifieds market, is the closest peer in the listed space. Yelp is trading at a huge premium
to JD, giving us a sense of potential for this medium.
Exhibit 19: Comparison with companies in similar business model or are trading at higher valuation multiples
Company Net Cash Net Assets FCFF Yield @ TP P / E @ TP TV @ TP TV @ TP
TP FY13 FY13 FY13 FY14E FY15E FY13 FY14E FY15E & NA & NC
Rs Rs Mn Rs Mn % % % times times times % %
Just Dial 700 5254 4371 1.4% 2.1% 3.0% 71 50 35 86% 84%
Info Edge 406 4634 5273 0.0% 3.2% 3.8% 48 36 28 81% 82%
Yelp (in USD) 32 95 166 -0.4% 0.1% 1.2% -236 189 72 90% 94%
Asian Paints 4610 8149 33462 1.2% 2.7% 3.3% 38 33 27 86% 92%
Colgate 1328 4500 4904 2.4% 2.5% 3.1% 37 32 27 92% 92%
HUL 514 34398 26311 3.4% 3.2% 3.8% 34 31 28 91% 90%
Jubilant Foodworks 1018 1521 4362 0.4% 0.8% 2.2% 49 37 26 90% 95%
Source: Bloomberg, Emkay Research, NA: Net Assets, NC: Net Cash
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Brief company profile
Just Dial (JD) was founded and incorporated by first generation entrepreneur V. S. S. Mani.
The company is the brain-child of Mr. Mani, who conceived the idea of providing up-to-date
business listings 24x7 during its 2-year job stint with Yellow Pages during1987-89.
JD commenced its voice-based search business operation in 1996 in Mumbai. Today, the
company has voice data centre search services across 250 cities in India. It launched its
local search web services in early 2007, and added SMS and mobile Internet search
services in the latter part of the year.
In 2009, JD launched its services in the US to experience the market first-hand. With not
much development in the US, the company de-merged the same into a different entity with
JDs promoters and investors as its owners. It is no more a part of the Just Dial Ltd. The
brand, JustDial, is owned by Just Dial Ltd., and JD Global would pay royalty on using the
same whenever operations commence.
At present, JD has 7342 employees, of which 2707 employees are in sales, 944 are on the
field, around 1000 in the voice data centre, and the rest is employed in product
development, security, database management and administration. The employee cost, the
biggest cost incurred by the company, was pegged at 49% in its 9M FY13 results.
Exhibit 20: Profile of Key Management Personnel
Source: Company, Emkay Research
Personnel Designation Profile
Mr. V. S. S. Mani Managing
Director
Mr. Mani is the founder of Just Dial Ltd. and has rich experience in the filed of classified. Prior to incorporating
JD, Mr. Mani was co-founder of Ask Me Services and also had a stint with United Database (I) Pvt. Ltd. He
has architect the informative medium of classified across platforms in India
Mr. V Krishnan Executive
Director
Mr. Krishan is co-founder of Just Dial Ltd. He operates from Delhi and looks after NCR region which is top 2
markets for JDs revenue. Along with Mr Mani, he looks after strategy, planning, expansion and operations at
JD.
Mr. Ramkumar
Krishnamachari
Chief Financial
Officer
Mr. Ramkumar joined Just Dial in 2010 as CFO. By qualification, he is Chartered Accountant, Certified Public
Accountant (CPA), USA and Certified Financial Analyst (CFA), USA. He has nearly 22 years of experience in
field of accounting and finance. Prior to Just Dial, Mr. Ramkumar has worked with Reliance Capital and RoyalSundaram General Insurance Allied Co. Ltd.
Mr. Sandipan
Chattopadhyay
Chief Technology
Officer
Mr. Sandipan handles crucial function of technology at Just Dial. Technology is an important area of operation
at JD considering the business is based on new tech medium platforms. He holds Post Graduate Diploma in
Computer Aided Management from IIM, Kolkata and has 16 years of experience in field of technology.
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Exhibit 21: Search Comparison on Google and on Just Dial (an example, would be different for other category search)
ource: Emkay Research
Google directs the search
to justdial
Adwords listing doesnt
provide user ratings and
is less objective
Justdial search provides
each vendor rating and is
far more objective
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Exhibit 22: JDs website prompts for User contact details
Source: Emkay Research
Exhibit 23: Google has Product Listing Ads ahead of JDs Quick Quotes platform
Source: Emkay Research
Justdial website does
prompt for Users contact
info which is shared with
premium listings. The
same fills the gap of
getting users contact on
Voice platform
Google has launched
Product Listing Ads
wherein a product
specific search leadsto price quotes ads
from the listed vendor.
Just Dial is planning a
similar model which
would be local vendor
base rather than e-
commerce
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Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Net Sales 2,594 3,636 4,583 5,962
Growth (%) 44.4 40.2 26.0 30.1
Expenditure 1,948 2,636 3,205 3,966Raw Materials 0 0 0 0
Employee Cost 1,308 1,763 2,151 2,625
Other Exp 640 873 1,054 1,341
EBITDA 673 1,000 1,377 1,996
Growth (%) 48.2 48.6 37.8 44.9
EBITDA mar gin (%) 25.7 27.5 30.1 33.5
Depreciation 90 136 223 325
EBIT 583 864 1,154 1,671
EBIT mar gin (%) 22.2 23.8 25.2 28.0
Other Income 150 150 322 373
Interest expenses 0 0 0 0
PBT 732 1,014 1,476 2,045Tax 209 311 487 675
Effective tax rate (%) 28.6 30.6 33.0 33.0
Adjusted PAT 523 703 989 1,370
Growth (%) 81.1 34.6 40.6 38.5
Net Marg in (%) 19.9 19.3 21.6 23.0
(Profit)/loss from JVs/Ass/MI 0 0 0 0
Adj. PAT After JVs/Ass/MI 523 703 989 1,370
E/O items 0 0 0 0
Reported PAT 523 703 989 1,370
PAT after MI 523 703 989 1,370
Growth (%) 81.1 34.6 40.6 38.5
Balance Sheet
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
Equity share capital 519 694 694 694
Reserves & surplus 542 3,677 4,260 4,817
Net worth 1,061 4,371 4,954 5,512Minority Interest 0 0 0 0
Secured Loans 12 0 0 0
Unsecured Loans 0 0 0 0
Loan Funds 12 0 0 0
Net deferred tax liability -9 2 75 182
Total Liabilities 1,063 4,373 5,030 5,694
Gross Block 348 606 881 1,283
Less: Depreciation 0 0 223 548
Net block 348 606 658 736
Capital work in progress 12 12 0 0
Investment 1,568 4,501 4,750 5,250
Current Assets 540 1,060 1,756 2,275Inventories 0 0 0 0
Sundry debtors 0 4 0 0
Cash & bank balance 237 753 1,453 1,972
Loans & advances 263 263 263 263
Other current assets 40 40 40 40
Current lia & Prov 1,405 1,805 2,134 2,566
Current liabilities 1,392 1,805 2,134 2,566
Provisions 13 0 0 0
Net current assets -865 -745 -378 -292
Misc. exp 0 0 0 0
Total Assets 1,063 4,373 5,030 5,694
Cash Flow
Y/E Mar (Rsmn) FY12A FY13E FY14E FY15E
PBT (Ex-Other income) 556 864 1,154 1,671
Depreciation 90 136 223 325
Interest Provided 0 0 0 0
Other Non-Cash items 0 0 0 0
Chg in working cap 392 407 407 539
Tax paid -209 -311 -487 -675
Operating Cashflow 829 1,096 1,297 1,860
Capital expenditure -177 -393 -263 -402
Free Cash Flow 652 703 1,034 1,457
Other income 176 150 322 373Investments -408 -2,933 -249 -500
Investing Cashflow -409 -3,176 -191 -529
Equity Capital Raised -392 2,607 0 0
Loans Taken / (Repaid) 8 -12 0 0
Interest Paid 0 0 0 0
Dividend paid (incl tax) 0 0 -406 -812
Income from investments 0 0 0 0
Others 0 0 0 0
Financing Cashflow -383 2,595 -406 -812
Net chg in cash 36 516 700 518
Opening cash position 201 237 753 1,453
Closing cash position 237 753 1,453 1,972
Key Ratios
Y/E Mar FY12A FY13E FY14E FY15E
Profitability (%)
EBITDA Margin 25.7 27.5 30.1 33.5
Net Margin 19.9 19.3 21.6 23.0
ROCE 73.8 37.3 31.4 38.1
ROE 52.5 25.9 21.2 26.2
RoIC -97.6 -105.0 -111.8 -123.7
Per Share Data (Rs)
EPS 7.5 10.1 14.2 19.7
CEPS 8.8 12.1 17.5 24.4
BVPS 15.3 63.0 71.3 79.4DPS 0.0 0.0 5.0 10.0
Valuations (x)
PER 83.0 61.7 43.9 31.7
P/CEPS 70.8 51.7 35.8 25.6
P/BV 40.9 9.9 8.8 7.9
EV / Sales 16.0 10.5 8.1 6.1
EV / EBITDA 61.8 38.1 27.0 18.1
Dividend Yield (%) 0.0 0.0 0.8 1.6
Gearing Ratio (x)
Net Debt/ Equity -1.7 -1.2 -1.3 -1.3
Net Debt/EBIDTA -2.7 -5.3 -4.5 -3.6
Working Cap Cycle (days) -153.5 -150.4 -145.9 -138.6
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