Just Dial. CMP: INR1,129 TP: INR1,475 Buy

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1 BSE SENSEX S&P CNX 23,871 7,109 Bloomberg JUST IN Equity Shares (m) 70.2 M.Cap. (INR b) / (USD b) 79.2/ Week Range (INR) 1,774/589 1, 6, 12 Rel. Per (%) -18/-7/- Financials & Valuation (INR m) Y/E Mar E 2016E Net Sales 4,613 5,945 7,521 EBITDA 1,422 1,807 2,456 Adj PAT 1,206 1,544 2,066 EPS (INR) Gr. (%) BV/Sh (INR) RoE (%) RoCE (%) P/E (x) P/BV (x) May QFY14 Results Update Sector: Technology CMP: INR1,129 TP: INR1,475 Buy PAT higher than estimates: (JUST) reported revenue of INR1.24b (est. of INR1.21b), marking a YoY growth of 26.4%, primarily driven by 27% growth in paid subscriber base (262,150 as of FY14 v/s 206,500 in FY13). EBITDA margin for 4QFY14 stood at 30.1% (est. 30.8%), against 27.8% in 4QFY13, a YoY increase of 230bp mainly due to operating leverage. PAT for 4QFY14 stood at INR342m (est. INR302m), marking a YoY growth of 60% driven by strong operational performance and lower than expected tax rate (which stood at 26% as the company avails indexation benefits on other income). Deferred revenues stood at INR1.62b in FY14 (128 days of revenues) vs INR1.35b in FY13 marking a YoY growth of 20.0% even as Evergreen contracts contributed 60% to revenues in FY14 as against 50% in FY13. Search growth continues to be robust: Total search requests for 4QFY14 stood at 290.4m, compared to 210.8m in 4QFY13, marking a growth of 38%. Internet saw a growth of 24% (176.2m v/s 141.9m), mobile internet grew by 126% (78.1m v/s 34.5m), while voice grew by 5% (36.1m v/s 34.4m). Search Plus on the right track: JUST has more than 17 Search Plus services live on the platform. Company also launched real time reverse auction for branded goods, which will enable a user/buyer to discover the best price for any branded good/s on a real-time basis. Also, JUST launched JD Maps during the quarter by replacing Google Maps for directions on the platform. Number of subscribers who have transacted for Search Plus services stood at ~140,000 in 4QFY14 vs ~85,000 in 3QFY14. Valuation and view: We believe JUST will be able to grow at a faster pace in FY15, driven by price increases. While we have factored a one-time ad spend of INR600m in our estimates, we have not taken any benefits on revenue from Search Plus, thereby providing an upside risk to our FY16E estimates. The stock trades at 51x FY15E and 38x FY16E EPS respectively. We value JUST at 50x FY16E EPS of INR29.5. Maintain Buy with a target price of INR1,475. Niket Shah (Niket.Shah@MotilalOswal.com); Atul Mehra (Atul.Mehra@MotilalOswal.com); Investors are advised to refer through disclosures made at the end of the Research Report.

2 PAT higher than estimates reported revenues of INR1242m (est of INR1216m) as compared to INR983m in 4QFY13, marking a YoY growth of 26.4%. This was primarily driven by 26.9% growth in paid subscriber base which stood at 262,150 in 4QFY14 as against 206,500 at end of 4QFY13. JD has also taken price increase in few categories which has resulted in higher top-line growth. EBITDA stood at INR374m (est INR374m) as against INR273m in 4QFY13, marking a YoY growth of 37%. EBITDA margins for 4QFY14 stood at 30.1% (est 30.8%) against 27.8% in 4QFY13, a YoY increase of 230bp. Increase in margins is primarily due to favorable operating leverage and 250bps reduction in other expenses. PAT for 4QFY14 stood at INR342m (est INR302m) as compared to INR214m in 4QFY13 marking a YoY growth of 60%. PAT growth was higher than our estimates primarily due to lower than expected tax rate (26% as against est of 35%). Tax rate is lower than full tax rate as the company avails indexation benefits on other income. Management expects tax rate to be sustained at current levels in FY15 and FY16. Deferred revenues stood at INR1.62b in FY14 (128 days of revenues) as against INR1.35b in FY13 marking a YoY growth of 20.0% even as Evergreen contracts contributed 60% to revenues in FY14 as against 50% in FY13. This highlights strong growth visibility for FY15 as money on deferred revenues has already been collected upfront and the revenues will be recognized in FY15. Management highlights revenue growth for FY15 can be expected to be at ~28% (Higher than FY14), led by 22-24% growth in paid campaigns and 6-8% growth in pricing. Full impact of price hikes taken in 3QFY14 will be visible in FY15 as older contracts come for renewals. Management plans to launch ad campaign for just dial search plus shortly and expect to start monetization from 3QFY15. Cash on balance sheet stood at INR6.6b as on FY14 as against INR5.1b in FY13. Total number of business listing (m) Paid campaign as a % of total listing No of business listings (m) No of campaigns (in 000s) Paid campaigns as % of total listings FY10 FY11 FY12 FY13 FY14 FY15E FY16E FY10 FY11 FY12 FY13 FY14 FY15E FY16E 13 May

3 Continues to invest in sales force Employee cost came in at 625m in 4QFY14 as against 493m in 4QFY13 marking a YoY growth of 27%. Employee costs saw a jump of 20bps from 50.2% in 4QFY13 to 50.4% in 4QFY14. Total number of employees stood at 8,543 at the end of 4QFY14 as against 7,497 in 4QFY13 (8,683 in 3QFY14). Of the total number of employees ~4,800 are sales executives, ~2,100 IROs, 2,000 Technology officers and 200 others. Decline in employees on a sequential basis is a 4Q phenomenon as most of the IROs are students. In April-14, employee count has already crossed 9,000. Management expects to add 1,500-2,000 employees in FY15. Total number of employees rising Growth in cost per employee to moderate 3, ,763 Total employees Growth % ,868 6,201 7,497 8,543 10, , Avg. cost per employee (INR 000s) Growth in cost per employee % FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E FY09 FY10 FY11 FY12 FY13 FY14E FY15E FY16E Campaign growth continues at a decent pace Total listings stand at 11.8m in 4QFY14 vs 9.1mn listings at end of 4QFY13, marking a YoY growth of 30%. (10.8m as of 3QFY14). Paid subscribers stood at 262,150 in 4QFY14 as against 206,500 in 4QFY13, marking a growth of 26.9%. 4QFY14 saw additions of 12,500 paid campaigns (3QFY14 paid campaigns stood at 2,49,600). The paid subscriber as % of total listings stays at 2.2% in 4QFY14 vs 2.3% in 4QFY13. 23% of listings are premium listings they contributed 45% to total revenues. Premium listing continue to rise Number of campaigns (in 000s) Premium listings % FY11 FY12 FY13 FY14 Growth in average realization per campaign to stabilize Avg. realization per campaign per year (INR) Growth% ,668 20,246 17, ,219 19,686 20,473 21, FY10 FY11 FY12 FY13 FY14 FY15E FY16E 13 May

4 Search growth continues to be robust Total search requests for 4QFY14 stood at 290.4m in 4QFY14 as compared to 210.8m in 4QFY13 marking a growth of 38%. Internet saw growth of 24% (176.2m v/s 141.9m), mobile internet grew by 126% (78.1m v/s 34.5m), while voice grew by 5% (36.1m v/s 34.4m). In line with trends observed in the past few quarters, mobile internet and internet continue to outpace voice search growth. This should help in margin accretion due to lower employee growth. Internet and mobile internet search requests now stand at 88% of total search requests in 4QFY14 as compared to 84% in 4QFY13. Mobile internet contribution increased to 26.9% of total search requests for 4QFY14 from 16.4% in 4QFY13. Management expects momentum in search growth to continue. Strong search growth (m) Search growth category wise 4QFY14 4QFY13 Change (YoY) 3QFY14 Change (QoQ) Internet % % Mobile % % Voice searches/ SMS % % Total % % % contribution of total searches 4QFY14 4QFY13 3QFY14 Internet Mobile Voice searches/ SMS Total Number of searches on JUST segment-wise (m nos) Mobile and internet contribution increases (%) Internet Mobile Voice SMS E 2016E Internet Mobile Voice SMS E 2016E 13 May

5 Search Plus on the right track JD has more than 17 search plus services live on the platform. The Company also launched Real Time Reverse Auction for branded goods, which will enable a user/buyer to discover the best price for any branded good/s on a real time basis. Additionally, JD launched JD Maps during the quarter replacing Google maps for directions on the platform. JD is not planning to monetize JD maps service and cost to maintain the service is negligible. JD does ~2,000 transactions per day currently. This number is expected to rise significantly as more and more businesses are listed. Number of subscribers who have transacted for Search Plus services stood at ~140,000 in 4QFY14 vs ~85,000 in 3QFY14. What is Real Time Reverse Auction In reverse auction, the roles of buyer and seller are reversed. In an ordinary auction, buyers compete to obtain a good or service by offering increasingly higher prices. In a reverse auction, sellers compete to obtain business from the buyer and prices will typically decrease as sellers undercut among peers. Company s real-time reverse auction will result in vendors competing among themselves to fulfill an order that is placed by a consumer on JUST. How it works Consumers enter their local pin code and choose a product they want to buy. JUST will intimate all local sellers for that particular area (preference to paid listings) and ask them to bid soon. The first seven sellers who place a bid will be taken into consideration for that particular order, thus generating the urgency to be bid. The consumer will receive the individual quotes bid by each vendor and can choose the best among them. Once the consumer confirms the bid from a particular vendor, the order gets placed and is delivered on the same day by the vendor. Consumer s details will only be made known to the vendor who fulfills the order. How will monetization for JUST work out JUST will charge 0.2% of order value from each vendor who participates in the bidding process. Also, JUST will charge 1% of order value on transaction 13 May

6 Plethora of services will be aggregated into JD Master APP Online food delivery and table booking 13 May

7 Order food with a few clicks Bus, flight, train, hotel bookings 13 May

8 Book doctor s appointment simplifies lives for doctors Current version of Get Quotes to be significantly enhanced through RTRA 13 May

9 Story in charts Total number of business listing (m) Paid campaign as a % of total listing No of business listings (m) No of campaigns (in 000s) Paid campaigns as % of total listings FY10 FY11 FY12 FY13 FY14 FY15E FY16E Premium listing continue to rise Number of campaigns (in 000s) Premium listings % FY11 FY12 FY13 FY14 FY10 FY11 FY12 FY13 FY14 FY15E FY16E Growth in average realization per campaign to stabilize Avg. realization per campaign per year (INR) Growth% ,668 20,246 17, ,219 19,686 20,473 21, FY10 FY11 FY12 FY13 FY14 FY15E FY16E Number of searches on JUST segment-wise (m nos) Mobile and internet contribution increases (%) Internet Mobile Voice SMS E 2016E Internet Mobile Voice SMS E 2016E 13 May

10 : an investment profile Company description Ltd (JDL) 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 ( and ) and user friendly mobile phone interface, it attained significant mind share with users for their local search needs. Key investments arguments Strong brand with first-mover advantage complimented by strong database. Weekly and monthly payment packages - a masterstroke in our view. Focus on increasing paid subscriber base going forward. Contribution from internet and mobile internet to increase to 75% in FY15E from 62% in FY13, thereby driving margins. Investment risks Execution with evolving technology. Competition from Google could be a threat. Regulatory hurdles. Recent developments/ triggers to watch Increase search requests from internet and mobile internet. Improvement in contribution of evergreen contracts. Increased number of paid subscriber base owing to traction from Tier2 and 3 cities. Valuation and view We believe JD will be able to grow at a faster pace in FY15 over FY14 driven by price increases taken in the business. While we have factored in one time ad spend of INR 600mn in our model, we have not taken any benefits on the revenues thereby provide upside risk to our FY16E estimates. The stock trades at 51x FY15E and 38x FY16E EPS respectively. We value the stock at 50x FY16E EPS of INR29.5. Maintain Buy with a target price of INR1,475. EPS: MOSL forecast v/s consensus (INR) MOSL Forecast Consensus Forecast Variation (%) FY FY Target price and recommendation Current Target Upside Reco Price (INR) Price (INR) (%) 1,129 1, Buy Shareholding pattern (%) Mar-14 Dec-13 Mar-13 Promoter Domestic Inst Foreign Others Stock performance (1-year) 13 May

11 Financials and valuations Income statement (INR m) Y/E March E 2016E Net Sales 3,628 4,613 5,945 7,521 Change (%) EBITDA 1,008 1,422 1,807 2,456 EBITDA Margin (%) Depreciation EBIT 864 1,249 1,624 2,218 Interest Other Income Extraordinary items PBT 984 1,649 2,144 2,868 Tax Tax Rate (%) Reported PAT 687 1,206 1,544 2,066 Adjusted PAT 702 1,206 1,544 2,066 Change (%) Balance sheet (INR m) Y/E March E 2016E Share Capital Reserves 3,564 4,643 5,861 7,440 Net Worth 4,259 5,345 6,563 8,141 Debt Deferred Tax Total Capital Employed 4,269 5,363 6,581 8,159 Gross Fixed Assets 967 1,060 1,460 1,860 Less: Acc Depreciation Net Fixed Assets Capital WIP Investments 4,858 6,257 6,257 6,257 Current Assets ,861 3,430 Inventory Debtors Cash & Bank ,260 2,708 Loans & Adv, Others Curr Liabs & Provns 1,806 2,287 2,282 2,436 Curr. Liabilities 1,787 2,103 2,252 2,396 Provisions Net Current Assets -1,213-1, Total Assets 4,269 5,363 6,581 8,159 E: MOSL Estimates Ratios Y/E March E 2016E 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 Turnover Ratios (%) Fixed Asset Turnover (x) Asset Turnover (x) Creditors (No. of Days) Working Cap. Turnover Leverage Ratios (%) Debt/Equity (x) Cash flow statement (INR m) Y/E March E 2016E OP/(Loss) before Tax 984 1,649 2,144 2,868 Depreciation Interest Direct Taxes Paid (Inc)/Dec in Wkg Cap Extraordinary items (net) CF from Op. Activity 1,023 1,719 1,616 2,336 (Inc)/Dec in FA & CWIP (Pur)/Sale of Invt -3,188-1, Others CF from Inv. Activity -3,535-1, Inc/(Dec) in Net Worth 2, Inc / (Dec) in Debt Interest Paid Divd Paid (incl Tax) CF from Fin. Activity 2, Inc/(Dec) in Cash ,448 Add: Opening Balance ,260 Closing Balance ,260 2, May

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