Financial Highlights

Results Review
INDIA
CONSUMER DISCRETIONARY
7 August 2014


REPORT AUTHORS
Gaurang Kakkad
+91 22 6766 3470
gaurang.kakkad@religare.com







PRICE CLOSE (07 Aug 14)
INR 1,186.20
MARKET CAP
INR 77,676 mln
USD 1,264 mln
SHARES O/S
64.3 mln
FREE FLOAT
51.4%
3M AVG DAILY VOLUME/VALUE
0.3 mln / USD 5.0 mln
52 WK HIGH
INR 1,389.95
52 WK LOW
INR 938.60





BUY
TP: INR 1,350.00
13.8%
Jubilant Foodworks
J UBI IN


Muted Q1; upgrade to BUY on expected recovery

JUBI reported a below-expected Q1 with net sales/EBITDA/adj. PAT growth
of 20.3%/(11.5%)/(18.5%). We upgrade the stock to BUY (from SELL) as we
expect SSSg to bounce back to double digits from FY16/FY17. Margins may
have bottomed out at ~12-13%, and should recover to ~16-17% in FY16/
FY17. Valuations (37x/27x FY16/FY17) are fai r as the earnings downgrade
cycl e seems behind us (expect 35% earnings CAGR over FY14-FY17). We
value JUBI at 35x Sep16 earnings to arrive at Sep 15 TP of Rs 1,350. BUY.

SSSg at -2.4%; moderate recovery from Q4: Net sales grew 20.3% YoY to Rs 4.76bn
with SSSg coming in at -2.4% YoY (slightly higher than Q4s -3.4%). The company will
add 150 stores in FY15 (similar to FY14 levels), which in our view is to sustain
topline growth from new store adds. JUBI added 35 stores in Q1, taking the total
Dominos count to 761 at Jun14-end. SSSg nosedived to 1.6% in FY14 (from 16.2%
in FY13), but should recover in H2FY15/FY16 as urban consumption picks up (expect
12% CAGR in SSSg over FY14-FY16). Dunkin Donuts (DD) is likely to remain
non-core in terms of its contribution over the next 2-3 years.
EBITDA margins decline on higher promotions: EBITDA margins slid 445bps YoY to
12.4%, with EBITDA falling 11.5% YoY to Rs 590mn. But gross margins were up
50bps YoY on price hikes despite double-digit food inflation. Other expenses rose
210bps YoY to 31.6% on higher ad spends, and rental costs 100bps YoY to 9.8% on
negative operating leverage. Employee costs were up 180bps YoY to 20.8%. Adj.
PAT was down 18.5% YoY to Rs 277mn, below estimates on lower margins.
Upgrade to BUY with a Sep15 TP of Rs 1,350: We cut our FY15 earnings by 10%
while maintaining our FY16/FY17 earnings estimates on expectations of a recovery
from H2FY15. We upgrade JUBI to BUY (from SELL) with a Sep15 TP of Rs 1,350
(valuing the stock at 35x Sep16 earnings, based on a 35% earnings CAGR over
FY14-FY17).
Y/E 31 Mar FY13A FY14A FY15E FY16E FY17E
Revenue (INR mln) 14,143 17,360 21,327 26,416 32,960
EBITDA (INR mln) 2,417 2,493 3,199 4,359 5,768
Adjusted net profit (INR mln) 1,314 1,182 1,509 2,090 2,867
Adjusted EPS (INR) 20.1 18.1 23.1 31.9 43.8
Adjusted EPS growth (%) 26.8 (10.1) 27.5 38.5 37.1
DPS (INR) 0.0 0.0 0.0 0.0 0.0
ROIC (%) 60.1 40.3 35.8 37.8 44.8
Adjusted ROAE (%) 36.2 24.1 24.2 26.0 27.3
Adjusted P/E (x) 59.0 65.6 51.4 37.1 27.1
EV/EBITDA (x) 31.5 30.4 23.8 17.5 13.1
P/BV (x) 18.0 14.1 11.1 8.6 6.5
Source: Company, Factset, RCML Research
This report has been prepared by Religare Capital Markets Limited or one of its affiliates. For analyst certification and other important disclosures, please refer to the Disclosure and Disclaimer section at the end of
this report. Analysts employed by non-US affiliates are not registered with FINRA regulation and may not be subject to FINRA/NYSE restrictions on communications with covered companies, public appearances, and
trading securities held by a research analyst account.
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BUY
TP: INR 1,350.00
13.8%
Jubilant Foodworks
J UBI IN

Results Review
INDIA
CONSUMER DISCRETIONARY



7 August 2014 Page 2 of 6

Investment thesis
Expect SSSg to recover to double-digits in FY16: JUBIs SSSg nosedived to 1.6% in
FY14 from 16.2% in FY13, hit by a weak macro and a cut in discretionary spending by
consumers. The company has seen a 2.4% decline in SSSg in Q1FY15, which however
was slightly better than Q4FY14s 3.4% decline. We expect H1FY15 to remain under
pressure (SSSg at near-zero levels), but foresee a recovery to start kicking in from
H2FY15 as inflation likely peaks out. We expect a recovery in H2FY15/FY16 as urban
consumption picks up (expect 12% CAGR in SSSg over FY14-FY16).
Margins likely to have bottomed out at current levels: JUBIs Q1 EBITDA margins
stood at 12.4%, with Q4FY14 margins at 12.8% levels. The companys margins have
been primarily hit by higher A&P spends, partly on account of a weak macro as well
as heightened competition. We expect margins to recover from current levels as the
company has taken a ~2-3% price hike, which in turn would aid gross margins. Also,
we also dont expect the promotional intensity to worsen from current levels; in fact,
we anticipate some reduction in promotion levels, as already seen in some staple
categories over the past few months. We expect margins to gradually recover to
~16-17% in FY16-FY17 and then stabilise at these levels.
DS profitability over the medium term to aid margin expansion: JUBI has 34 DD
stores across 11 cities currently. Although management hasnt disclosed DD
contribution to JUBIs revenues, we dont expect it to be material. Management has
indicated that even if the DD store count were to reach 80-100 stores over the next
5 years, the contribution to JUBIs revenues would be in single digits. However, DD is
likely to be a drag on the EBITDA with JUBIs margins likely to be hit by ~150bps in
FY15 (~120bps impact in FY14). We however expect the margin impact to decline
over the next 2-3 years, supporting margin expansion form current levels. We expect
DD to breakeven in the next 3 years.
Earnings downgrades largely over; upgrade to BUY: We trim our FY15 earnings by
10% while maintaining our FY16/FY17 earnings estimates on expectations of a
recovery from H2FY15. We upgrade JUBI to BUY (from SELL) with a Sep15 TP of Rs
1,350, valuing the company at 35x Sep16 earnings. We expect JUBI to deliver a 35%
earnings CAGR over FY14-FY17 and hence value the company on a PEG of 1x (as we
see SSSg and margins picking up from the current depressed levels). A delay in
recovery leading to lower SSSg and a spike in food inflation impacting gross margins
remain the key risks to our call.
Fig 1 - Earnings Revision
Key parameters
FY15E FY16E
Old New % Chg Old New % Chg
Revenue (Rs mn) 21,507 21,327 (0.8) 26,641 26,416 (0.8)
EBITDA (Rs mn) 3,355 3,199 (4.6) 4,289 4,359 1.6
EBITDA margin (%) 15.6 15.0 (60 bps) 16.1 16.5 40 bps
Net profit (Rs mn) 1,670 1,509 (9.7) 2,057 2,090 1.6
EPS (Rs) 25.5 23.06 (9.7) 31.4 31.94 1.6
Source: RCML Research
BUY
TP: INR 1,350.00
13.8%
Jubilant Foodworks
J UBI IN

Results Review
INDIA
CONSUMER DISCRETIONARY



7 August 2014 Page 3 of 6

Fig 2 - Actuals Vs Estimates
(Rs mn) Q1FY15A Q1FY15E
Difference
(%)
Q1FY14A
YoY
growth %
Net Sales 4,768 4,797 (0.6) 3,964 20.3
EBITDA 590 698 (15.5) 666 (11.5)
EBITDA margins (%) 12.4 14.5 (220 bps) 16.8 (445 bps)
Adj. PAT 277 330 (15.9) 340 (18.5)
Adj. PAT margins (%) 5.8 6.9 (105 bps) 8.6 (275 bps)
Source: RCML Research, Company
Fig 3 - Quarterl y Performance
Q1FY15 Q1FY14
% change
YoY
Q4FY14
% change
QoQ
Net Sales 4,768 3,964 20.3 4,337 10.0
Raw Material Consumed 1,020 857 19.0 929 9.8
Stock Adjustment (10) (5) 100.6 6 (263.9)
Purchase of Finished Goods 200 176 14.0 135 48.1
Employee Expenses 991 753 31.7 918 8.0
Rent 469 349 34.7 428 9.7
Other Expenses 1,508 1,169 29.0 1,365 10.5
EBITDA 590 666 (11.5) 556 6.0
EBITDA MARGIN (%) 12.4 16.8 (445 bps) 12.8 (45 bps)
Depreciation 223 179 24.5 213 4.9
EBIT 367 487 (24.8) 343 6.7
Other Income 17 22 (23.0) 24 (27.3)
Other Operating Income - 1 - 1 -
Interest - - - - -
PBT 384 510 (24.8) 368 4.3
Tax 106 170 (37.4) 118 (10.0)
Reported Profit After Tax 277 340 (18.5) 250 11.1
Adjusted Profit After Extra-ordinary item 277 340 (18.5) 250 11.1
EPS 4.3 5.2 (18.5) 3.8 11.1
Source: RCML Research, Company


BUY
TP: INR 1,350.00
13.8%
Jubilant Foodworks
J UBI IN

Results Review
INDIA
CONSUMER DISCRETIONARY



7 August 2014 Page 4 of 6

Per Share Data
Y/E 31 Mar (INR) FY13A FY14A FY15E FY16E FY17E
Reported EPS 20.1 18.1 23.1 31.9 43.8
Adjusted EPS 20.1 18.1 23.1 31.9 43.8
DPS 0.0 0.0 0.0 0.0 0.0
BVPS 66.0 84.1 106.8 138.7 182.5

Valuation Ratios
Y/E 31 Mar (x) FY13A FY14A FY15E FY16E FY17E
EV/Sales 5.4 4.4 3.6 2.9 2.3
EV/EBITDA 31.5 30.4 23.8 17.5 13.1
Adjusted P/E 59.0 65.6 51.4 37.1 27.1
P/BV 18.0 14.1 11.1 8.6 6.5

Financial Ratios
Y/E 31 Mar FY13A FY14A FY15E FY16E FY17E
Profitabilit y & Return Ratios (%)
EBITDA margin 17.1 14.4 15.0 16.5 17.5
EBIT margin 13.2 9.8 10.1 11.4 12.7
Adjusted profit margin 9.3 6.8 7.1 7.9 8.7
Adjusted ROAE 36.2 24.1 24.2 26.0 27.3
ROCE 34.7 22.8 23.1 25.2 26.6
YoY Growth (%)
Revenue 38.8 22.7 22.9 23.9 24.8
EBITDA 28.8 3.1 28.3 36.2 32.3
Adjusted EPS 26.8 (10.1) 27.5 38.5 37.1
Invested capital 19.1 43.6 46.2 23.8 11.5
Worki ng Capital & Li qui dit y Rati os
Receivables (days) 2 2 2 2 2
Inventory (days) 21 23 22 22 22
Payables (days) 39 38 41 40 40
Current ratio (x) 0.4 0.3 0.3 0.4 0.6
Quick ratio (x) 0.2 0.1 0.0 0.1 0.3
Turnover & Leverage Rati os (x)
Gross asset turnover 2.8 2.4 2.1 2.0 2.0
Total asset turnover 2.7 2.6 2.4 2.3 2.3
Net interest coverage ratio 2,930.4 0.0 0.0 0.0 0.0
Adjusted debt/equity (0.1) 0.0 0.0 (0.1) (0.2)

DuPont Anal ysis
Y/E 31 Mar (%) FY13A FY14A FY15E FY16E FY17E
Tax burden (Net income/PBT) 67.7 65.6 67.0 67.0 67.0
Interest burden (PBT/EBIT) 104.3 105.7 104.6 103.3 102.4
EBIT margin (EBIT/Revenue) 13.2 9.8 10.1 11.4 12.7
Asset turnover (Revenue/Avg TA) 271.6 259.0 243.7 234.6 226.6
Leverage (Avg TA/Avg equities) 143.5 136.8 140.2 140.2 138.4
Adjusted ROAE 36.2 24.1 24.2 26.0 27.3

BUY
TP: INR 1,350.00
13.8%
Jubilant Foodworks
J UBI IN

Results Review
INDIA
CONSUMER DISCRETIONARY



7 August 2014 Page 5 of 6

Income Statement
Y/E 31 Mar (INR ml n) FY13A FY14A FY15E FY16E FY17E
Total revenue 14,143 17,360 21,327 26,416 32,960
EBITDA 2,417 2,493 3,199 4,359 5,768
EBIT 1,861 1,705 2,152 3,020 4,178
Net interest income/(expenses) (1) 0 0 0 0
Other income/(expenses) 81 97 100 100 100
Exceptional items 0 0 0 0 0
EBT 1,941 1,802 2,252 3,120 4,278
Income taxes (628) (620) (743) (1,029) (1,412)
Extraordinary items 0 0 0 0 0
Min. int./Inc. from associates 0 0 0 0 0
Reported net profit 1,314 1,182 1,509 2,090 2,867
Adjustments 0 0 0 0 0
Adj usted net profi t 1,314 1,182 1,509 2,090 2,867
Balance Sheet
Y/E 31 Mar (INR ml n) FY13A FY14A FY15E FY16E FY17E
Accounts payables 1,325 1,737 2,289 2,604 3,383
Other current liabilities 897 1,404 1,706 2,245 2,802
Provisions 0 0 0 0 0
Debt funds 0 0 0 0 0
Other liabilities 0 0 0 0 0
Equity capital 651 654 654 654 654
Reserves & surplus 3,645 4,846 6,332 8,422 11,289
Shareholders' fund 4,296 5,500 6,987 9,077 11,943
Total liabil iti es and equi ties 6,518 8,642 10,981 13,926 18,128
Cash and cash eq. 375 242 75 521 2,051
Accounts receivables 68 90 132 143 200
Inventories 240 331 351 477 536
Other current assets 139 277 640 792 989
Investments 940 937 1,066 1,321 1,648
Net fixed assets 4,052 5,713 7,651 9,350 11,057
CWIP 0 0 0 0 0
Intangible assets 0 0 0 0 0
Deferred tax assets, net 0 0 0 0 0
Other assets 0 0 0 0 0
Total assets 5,814 7,591 9,915 12,605 16,480
Cash Flow Statement
Y/E 31 Mar (INR ml n) FY13A FY14A FY15E FY16E FY17E
Net income +Depreciation 1,869 1,970 2,556 3,429 4,456
Interest expenses 1 0 0 0 0
Non-cash adjustments 0 0 0 0 0
Changes in working capital 1,008 668 429 563 1,024
Other operating cash flows (7) (17) 0 0 0
Cash fl ow from operati ons 2,871 2,620 2,985 3,992 5,480
Capital expenditures (1,867) (2,430) (2,986) (3,038) (3,296)
Change in investments (721) (375) (114) (509) (654)
Other investing cash flows 0 0 0 0 0
Cash fl ow from investi ng (2,588) (2,805) (3,100) (3,547) (3,950)
Equities issued 0 0 0 0 0
Debt raised/repaid 0 0 0 0 0
Interest expenses (1) 0 0 0 0
Dividends paid 0 0 0 0 0
Other financing cash flows 13 (8) (9) (9) (9)
Cash fl ow from fi nancing 19 0 0 0 0
Changes in cash and cash eq 302 (185) (114) 446 1,530
Closing cash and cash eq 375 242 75 521 2,051



7 August 2014 Page 6 of 6

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