Jubilant FoodWorks. Institutional Equity Research. Sector - FMCG. RSec TradEdge India. January 17, 2017

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1 Recommendation Range STOP LOSS Target Jubilant FoodWorks Sector - FMCG Background & Business Jubilant FoodWorks (JFL) a Jubilant Bhartia Group Company incorporated in 1995 is India s largest and fastest growing food service company. JFL along with its subsidiary operates Domino s Pizza brand with the exclusive rights for India, Nepal, Bangladesh and Sri Lanka. The company operated 1081 Dominos and 73 Dunkin Donut stores by end of 2QFY17. Investment Rationale 1 Year Stock Price Performance 1,400 1,300 1,200 Expected Recovery in Same Store Sales Growth (SSSG): SSSG remains the key for meaningful turnaround in JFL s performance. Although demonetization drive is likely to dampen JFL s performance in 2HFY17E, we believe that gradual recovery in consumer confidence, increased promotions, moderation in competition and success of new products could take SSSG to higher levels. 1,100 1, Strong Cash Generation: While JFL s operating cash generation has fallen from 15% to 10% of sales in past four years, it still remains strong as JFL generates operating cash in the excess of Rs2.5bn annually. Notably, in past four years JFL has doubled its store count from 550 to 1,100 and added several commissaries without adding any debt on its books, which is impressive Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Impressive Cost Control: Although revenues have been impacted materially in the past four years on account of poor SSS growth and additional impact of Dunkin Donuts, JFL has maintained solid control over its costs. Looking ahead, while we expect JFL to continue on the cost rationalization trajectory, recovery in SSS holds the key for any visible uptick in operating performance and so does the stock price. Note: *CMP as on January 16, 2017 Key Figure Food Aggregators Not a Major Concern: We believe that though the food aggregators provide additional delivery choices to consumers, their impact on JFL s business model is limited considering its increased footprints and impeccable delivery record. Outlook & Valuation JFL has been undergoing a tumultuous time for last few quarters marked by stagnant SSSG, pressure on margins and high level exits with which the stock has corrected by 40% in past 1 year and by 22% in past 3 months. Despite near-term uncertainties, we believe that risk reward ratio is turning to be favourable, while revival in SSSG could be the most vital factor to watch out for, going forward. Risks Delay in recovery in Same Store Sales to impact revenue, margins and net profit Poor performance of Dunkin Donuts for extended period would dampen our estimates Mar (Rs mn) FY16 FY17E FY18E Revenues 24,095 26,088 30,417 EBITDA 2,844 2,668 3,628 EBITDA MARGIN % Adj.PAT 1, ROE (%) Market Cap ( Rsbn/US$mn ) 55.0/8.0 Current Price 833 Target Price 960 Promoters / Public & Others 45/55 FY18E P/E (x) 39.1 Revenues CAGR (FY16-18 %) 12.4 PAT CAGR (FY16-18 %) 10.5 Key Ratios FY16 FY17E FY18E P/E (x) P/BV (x) EV/EBITDA (x) Source: Company, RSec Estimates Research Team; Contact: (022) ; rsec.research@rcap.co.in 1

2 Recommendation Range STOP LOSS Target INOX Wind Background & Business Inox Wind (INXW) promoted by Gujarat Fluorochemicals is a fully integrated player in wind energy market with state-of-theart manufacturing plants at Una (HP) for Hubs & Nacelles and Rohika (Gujarat) for Blades & Tubular Towers. It manufactures key components for the Wind Turbine Generator. It manufactures the key components of the Wind Turbine Generator (WTG) to ensure high quality based on the most advanced technology, reliability of performance, and cost competitiveness. Investment Rationale Strong Order Book: As of 2QFY17, INXW had order book for WTGs with aggregate capacity of 1,346MW. It has >4,500MW of project sites as of 2QFY17, which oers good visibility for next 6-7 years. The Company has expanded presence in Andhra Pradesh & Karnataka with a sizable project site inventory. Comprehensive Turnkey Solutions for Wind Farm Projects: INXW provides turnkey solutions for wind firm projects including resource assessment, site acquisition, infrastructure development, erection and commissioning, long-term O&M of wind power projects. It has a perpetual license to use proprietary technology of AMSC an Austria-based wind energy technology company to manufacture 2MW WTGs in India. Renewed Thrust on Renewable Energy: The Government plans to add 175GW renewable power with wind power s share at 60GW by 2022 from 23GW as of FY15. Apart from assigning priority-sector status to renewable energy (up to Rs0.15bn) to ensure cheaper funding, several other measures i.e. Accelerated Depreciation, Generation-based Incentives & Renewable Energy Certificates have been reintroduced, which augur well for INOW. Outlook & Valuation We believe that strong outstanding order book and impeccable execution capabilities will continue to drive INXW s profitability and healthy returns in next few years. However, with the recent Gujarat Wind Policy and feed-in tari order in place, we expect power plant commissioning will pick-up pace from 4QFY17E onwards, which will result in lower working capital by 2HFY17E. Risks Any inordinate delays or defaults in customer payments, and Deterioration in net working capital days would lead to negative operating cash flows and higher debt. Mar (Rsmn) FY16 FY17E FY18E Revenues 44,141 44,331 48,730 EBITDA 6,902 6,206 7,212 EBITDA MARGIN % Adj.PAT 4,519 4,007 4,898 ROE (%) Year Stock Price Performance Sector - Capital Goods Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Note: *CMP as on January 16, 2017 Key Figure Market Cap ( Rsbn/US$mn ) 40.3/5.9 Current Price Target Price Promoters / Public & Others 85.6/14.4 FY18E P/E (x) 8.2 Revenues CAGR (FY16-18 %) 5.1 PAT CAGR (FY16-18 %) 4.1 Key Ratios FY16 FY17E FY18E P/E (x) P/BV (x) EV/EBITDA (x) Source: Company, RSec Estimates Research Team; Contact: (022) ; rsec.research@relianceada.com 2

3 Recommendations Summary Open Positions Stock Symbol Sector Reco Date Reco Price CMP SL Target Remarks JUBLFOOD FMCG 17-Jan BUY INOXWIND Capital Goods 17-Jan BUY ASIANPAINT FMCG 04-Jan HOLD Closed Positions Stock Symbol Sector Reco Date Reco Price Exit Price Exit Date Return % Remarks NBCC Infrastructure 21-Jun Jul % Booked Profit PERSISTENT IT 21-Jun Jul % Booked Loss SUNPHARMA Pharma 02-Jul Jul % Booked Profit PFS NBFC 02-Jul Aug % Booked Loss CROMPTON Capital Goods 15-Jul Jul % Booked Profit UPL Agrochemicals 15-Jul Jul % Booked Profit ABFRL Retailing 30-Jul Aug % Booked Profit KEC Capital Goods 30-Jul Sep % Booked Loss MGL Oil-Gas 17-Aug Aug % Booked Profit SUNPHARMA Pharma 17-Aug Sep % Booked Loss INFY IT 01-Sep Sep % Booked Profit BAJAJCORP Consumer 01-Sep Oct % Booked Profit AUROPHARMA Pharma 16-Sep Sep % Booked Profit NAVKARCORP Logistics 16-Sep Sep % Booked Loss ABFRL Retailing 03-Oct Oct % Booked Profit Continued... 3

4 Closed Positions Stock Symbol Sector Reco Date Reco Price Exit Price Exit Date Return % Remarks AMBUJACEM Cement 03-Oct Nov % Booked Loss ASHOKLEY Auto 17-Oct Oct % Booked Profit INFY IT 17-Oct Nov % Booked Loss TECHM IT 16-Nov Nov % Booked Profit CADILAHC Pharma 16-Nov Nov % Booked Profit FEDERALBANK Banking 01-Dec Dec % Booked Loss ASHOKLEY Auto 16-Dec Dec % Booked Profit TITAN FMCG 16-Dec Dec % Booked Profit CADILAHC Pharma 04-Jan Jan % Booked Profit CROMPTON Capital Goods 01-Dec Jan % Booked Profit 4

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