Jubilant Foodworks
BSE SENSEX
28,978
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, (INR m)
Free float (%)
S&P CNX
8,943
JUBI IN
65.8
70.3 / 1.1
1689 / 897
-12/-24/-47
613
55.0
6
September 2016
1QFY17 Results Update | Sector: Retail
CMP:INR1,068 TP:INR1,090 (+2%)
SSG decline a negative surprise
Downgrade to Neutral
Financials & Valuations (INR b)
Y/E Mar
2016 2017E 2018E
24.4
26.8
32.8
Net Sales
2.6
2.8
4.0
EBITDA
1.0
0.9
1.6
PAT
15.0
14.0
24.5
EPS (INR)
-11.7
-6.2
74.7
Gr. (%)
111.3 124.2 130.6
BV/Sh (INR)
13.4
11.3
18.8
RoE (%)
14.1
11.9
19.2
RoCE (%)
71.4
76.1
43.6
P/E (x)
9.6
8.6
8.2
P/BV (x)
Estimate change
TP change
Rating change
Sales below expectations led by SSS decline:
Net sales grew 6.7% YoY (est.
18% growth) to INR6.1b (Ind AS), EBITDA declined 14% YoY (est. 22% growth)
to INR577m and Adj. PAT declined 31% YoY (est.22% growth) to INR190m. SSS
declined 3.2% (est. 4% growth) due to weakening sentiment. SSS decline was
particularly surprising given that the company had reported 3% SSSG in the
preceding quarter despite a challenging 6% base in 4QFY15. Base was less
challenging at 4.6% in 1QFY16. The company also went in for lower Domino’s
store additions (23 vs our expectation of 31) in 1QFY17.
Gross margins expanded 110bps YoY to 76.8%.
(est. 76.2%) led by soft input
costs and negotiations on material costs. Mainly due to poor sales growth,
staff costs were up by 70bps YoY, rent by 120bps YoY and other expenses by
150bps YoY. This resulted in EBITDA margin contraction of 230bps YoY (est. 40
bps increase) to 9.5%. Adj. PAT declined by 31.1% YoY to INR295m.
Concall highlights:
a) Management is confident of positive SSS from 2Q17
onwards as July and August have been good; b) In a stark change in strategy,
the management has stated that they will not take price increases for 12-15
months. c) New products Burger Pizza and Pizza Mania Extreme have received
good response and are close to double digits in terms of sales.
Cut estimates sharply, downgrade to Neutral:
We have cut our estimates for
FY18 by 32% due to poor consumer sentiment and IND AS impact.
Management has guided for positive SSS from 2Q, but the delay in recovery to
high single digit SSG affects forecasts adversely. Strategy of not taking price
increases could boost growth but affects margins. While we like the business
model, decent ROEs even in slowdown, and strong potential earnings growth
on recovery, the poor medium term visibility, with possible worsening of
consumer sentiment no longer justifies positive view
Downgrade to Neutral
with TP of INR 1,090 (40x FY18EPS, 40% discount to historical multiples).
Krishnan Sambamoorthy
(Krishnan.Sambamoorthy@MotilalOswal.com); +91 22 3982 5428
Vishal Punmiya
(Vishal.Punmiya@MotilalOswal.com); +91 22 3980 4261
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.

Jubilant Foodworks
Key quarterly charts
Exhibit 1: SSS declined 3.2% vs. estimate of 4% growth
SSS Growth (%)
Exhibit 2: 23 Domino’s stores were added during 1QFY17
Dominos stores
Cities
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: Net sales grew 6.7% YoY to INR6.1b (est. INR6.7b)
45.0
42.3
Net Sales (INR b)
39.0
29.3
26.1 27.6
18.5 18.6 20.3
21.4
14.8
25.0
19.7 17.2
Sales growth (%)
14.4 14.0
6.7
Source: MOSL, Company
Exhibit 4: Adj. PAT declined 31.1% YoY
PAT growth (%)
Exhibit 5: Gross margin expanded 110bps YoY
Gross Margin (%)
Source: MOSL, Company
Source: MOSL, Company
6 September 2016
2

Jubilant Foodworks
Exhibit 6: Higher staff costs (up 70bps YoY), increased rental expenses (up 120bp YoY) and
higher other expenses (up 150bps YoY) dragged EBITDA performance
Staff Cost (%)
Rent Cost (%)
Other Expenditure (%)
Source: MOSL, Company
Exhibit 7: ..thus EBITDA margin contracted 230bps YoY to
9.5%
EBITDA Margin (%)
Exhibit 8: Recent new launches
Source: MOSL, Company
Source: MOSL, Company
Exhibit 9: 1 Dunkin Donut restaurant decommissioned in
rd
1QFY17 while 7 were added; 73 restaurants as on 3 Sept’16
Dunkin' Donuts stores
Cities
Exhibit 10: Total employee count stood at 27,662
Number of Employees ('000)
29.5
26.2
21.1
21.9
25.0
25.8
26.8
27.1
28.7 29.2
30.3
27.7 27.7
19.7
Source: MOSL, Company
Source: MOSL, Company
6 September 2016
3

Jubilant Foodworks
ConCall Highlights
SSSG and outlook
SSSG declined by 3.2% in 1QFY17 due to economic conditions and early
Ramadan in 1Q this year. Pizza mania scheme was launched a bit late this year in
May compared to April last year.
Consumer sentiment is depressed across the country.
Management is hopeful of improved performance and stated that they WILL
END UP with positive SSSG in 2QFY17. July and August have been better than
1QFY17.
Volume in 1QFY17 not too dissimilar to 4QFY17 but volumes continue to be
negative.
Pizza category still as large if not larger than burgers.
Technology
Food tech players are all are helping to grow delivery market. Delivery for
Jubilant too doing far better than dine in.
OLO (Online Ordering) for Jubilant is highest in the industry at 44% in 1QFY17.
Mobile ordering is 41% of OLO.
Jubilant Foodworks is the 7th most transacted E-Commerce brand in the country
now.
The company has hired a new technology officer reporting directly to the CEO.
Have also hired a new officer in charge of innovation.
Speech recognition based virtual order taking launched in select restaurants.
Management believes that they have taken customer CRM and data mining to
another level.
New products and initiatives
Burger Pizza is doing very well.
Pizza Mania extreme and Burger Pizza are around double digits as a proportion
of revenues.
Pricing, cost saving and margins
Will not take price increase between December last year to December this year,
a stark change in approach.
OLO and cost cutting is leading to lower employee per store without
compromising on service. Can use existing employees on recovery. Will hire
more on sharp recovery.
Energy management initiatives in association with Wipro implemented in half
their stores. Will soon roll out the cost savings program to other stores as well.
Gross margin improving due to excellent negotiation on material costs.
Management is confident of maintaining or growing gross margin. Outlook
benign. Will use it to offset some of the impact on other costs.
Renegotiated rentals on 15-20% on Dunkin Stores and significant part of
Dominos stores as well.
Promoter’s stake
Maintained that promoters are comfortable with stake over 40% (currently
45%). Funds were required for the Holding company.
6 September 2016
4

Jubilant Foodworks
Valuation and view
We have cut our estimates for FY18 by 32% due to poor consumer sentiment
and IND AS impact. Management has guided for positive SSS from 2Q, but the
delay in recovery to high single digit SSG affects forecasts adversely. Strategy of
not taking price increases could boost growth but affects margins.
While we like the business model, decent ROEs even in slowdown, and strong
potential earnings growth on recovery, the poor medium term visibility, with
possible worsening of consumer sentiment no longer justifies positive view
Downgrade to Neutral
with TP of INR 1,090 (40x FY18EPS, 40% discount to
historical multiples).
Exhibit 11: We cut our estimates for FY17/FY18 by 8/5%
New
FY17E
26,766
2,760
923
FY18E
32,835
3,993
1,613
Old
FY17E
29,217
3,794
1,614
FY18E
36,202
5,095
2,357
Change
FY17E
-8.4%
-27.2%
-42.8%
FY18E
-9.3%
-21.6%
-31.6%
Sales
EBITDA
PAT
Source: Company, MOSL
Exhibit 12: Jubilant Foodworks P/E (x)
120
90
60
30
0
58.8
21.3
40.1
PE (x)
Peak(x)
Avg(x)
Min(x)
103.1
Exhibit 13: Jubilant Foodworks P/E vs. Sensex
450
360
270
180
90
0
249.9
128.1
PB (x) PE Relative to Sensex PE (%)
LPA (%)
Source: Company, MOSL
Source: Company, MOSL
6 September 2016
5

Jubilant Foodworks
Story in charts
Exhibit 14: Revenue CAGR of 16% over FY16-FY18
Sales (INR b)
59.9
50.2
38.8
22.8
20.5
21
FY15
16.5
24
FY16
22.7
9.8
27
33
FY11
FY12
FY13
FY14
FY15
FY16
FY17E FY18E
74.9
74.3
74.8
73.8
73.9
Sales growth (%)
Exhibit 15: Gross margin contraction of 10bps over FY16-18E
Gross Margin (%)
76.2
76.4
76.1
7
FY11
10
FY12
14
FY13
17
FY14
FY17E FY18E
Source: MOSL, Company
Source: MOSL, Company
Exhibit 16: EBITDA margin expansion of 130bp over FY16-18
EBITDA Margin (%)
17.7
18.5
17.1
14.4
12.2
10.8
FY11
FY12
FY13
FY14
FY15
FY16
10.3
FY17E FY18E
12.2
Exhibit 17: PAT CAGR of 28% over FY16-FY18
PAT (INR b)
115.5
74.7
49.1
22.1
0.7
FY11
1.1
FY12
1.3
FY13
1.2
(9.8)
FY14
1.1
(6.1)
FY15
(6.2)
0.9
PAT growth (%)
(11.4)
1.0
FY16
1.6
FY17E FY18E
Source: MOSL, Company
Source: MOSL, Company
Exhibit 18: Reducing margin pressure due to new additions
New Domino's Stores Opened in past 3 Years/Existing stores
57.8
52.1
Exhibit 19: Earnings recovery will lead to improved RoE’s
38
30
28
RoE (%)
36
31
21
17
19
13
11
48.2
46.9
47.9
46.9
43.9
37.5
32.7
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Source: Company, MOSL
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17E FY18E
Source: Company, MOSL
6 September 2016
6

Jubilant Foodworks
Exhibit 20: Overall food service market expected to post 10% CAGR over FY13-18E (USD b)
% of Total
Food Services Market Size
Chain Market
QSR
Casual Dining
Café
Frozen Desserts
PBCL
Fine Dining
Licensed Standalone Market
Standalone Market (In Hotels)
Organized Market
Unorganized Market
Total Market
2013
2.5
1.1
0.8
0.3
0.2
0.1
0.1
10.5
1.3
14.3
33.7
48.0
2018
6.5
3.2
1.7
0.7
0.3
0.3
0.2
21.5
2.0
30.0
48.0
78.0
CAGR (%)
21.1
25.0
18.0
20.1
14.9
24.2
15.5
15.4
9.0
16.0
7.3
10.2
Source: Indian Food Services, MOSL
2013
5.2
2.2
1.6
0.6
0.3
0.2
0.2
21.9
2.7
29.8
70.2
2018
8.3
4.1
2.2
0.9
0.4
0.4
0.3
27.6
2.6
38.5
61.5
6 September 2016
7

Jubilant Foodworks
Financials and valuations
Income Statement
Y/E March
Net Sales
Change (%)
Material Consumed
Gross Profit
Gross Margin %
Operating expenses
EBITDA
Change (%)
Margin (%)
Depreciation
Other Non-recurring Inc.
PBT
Change (%)
Margin (%)
Tax
Tax Rate (%)
Adjusted PAT
Change (%)
Margin (%)
Reported PAT
Balance Sheet
Y/E March
Share Capital
Reserves
Net Worth
Loans
Capital Employed
Gross Block
Less: Accum. Depn.
Net Fixed Assets
Lease Deposits
Capital WIP
Investments
Deferred tax assets
Curr. Assets, L&A
Inventory
Account Receivables
Cash and Bank Balance
Others
Curr. Liab. and Prov.
Current Liabilities
Creditors
Provisions
Net Curr. Assets
Appl. of Funds
E: MOSL Estimates
2011
6,783
59.9
1,706
5,077
74.9
3,876
1,202
82.0
17.7
293
19
924
176.0
13.6
204
22.1
720
115.5
10.6
720
2012
10,191
50.2
2,617
7,574
74.3
5,693
1,881
56.5
18.5
377
58
1,562
69.0
15.3
488
31.3
1,073
49.1
10.5
1,033
2013
14,145
38.8
3,700
10,445
73.8
8,027
2,418
28.5
17.1
556
77
1,939
24.1
13.7
628
32.4
1,311
22.1
9.3
1,311
2014
17,372
22.8
4,534
12,838
73.9
10,333
2,505
3.6
14.4
787
85
1,803
-7.0
10.4
620
34.4
1,182
-9.8
6.8
1,182
2015
20,937
20.5
5,279
15,659
74.8
13,098
2,561
2.2
12.2
1,011
65
1,615
-10.4
7.7
504
31.2
1,111
-6.1
5.3
1,111
2016
24,383
16.5
5,801
18,583
76.2
15,943
2,640
3.1
10.8
1,282
110
1,467
-9.2
6.0
483
32.9
984
-11.4
4.0
984
2017E
26,766
9.8
6,306
20,460
76.4
17,700
2,760
4.6
10.3
1,515
131
1,376
-6.2
5.1
453
32.9
923
-6.2
3.4
923
(INR Million)
2018E
32,835
22.7
7,860
24,974
76.1
20,982
3,993
44.6
12.2
1,749
160
2,403
74.7
7.3
791
32.9
1,613
74.7
4.9
1,613
(INR Million)
2018E
658
7,935
8,593
17
8,611
17,241
7,883
9,358
1,889
261
1,307
-678
1,883
732
173
557
421
5,409
1,106
3,828
474
-3,526
8,611
2011
645
1,269
1,914
99
2,013
2,904
1,103
1,801
331
34
205
31
659
142
41
89
387
1,050
185
800
65
-391
2,013
2012
651
2,312
2,963
133
3,096
3,935
1,392
2,543
491
135
923
-69
578
187
64
131
196
1,504
304
1,133
67
-926
3,097
2013
653
3,645
4,298
122
4,420
5,802
1,852
3,950
660
102
940
-201
866
240
68
378
179
1,897
441
1,384
72
-1,032
4,420
2014
654
4,846
5,500
146
5,647
8,065
2,601
5,464
921
196
937
-375
1,102
331
90
246
435
2,599
659
1,825
115
-1,497
5,647
2015
656
5,806
6,462
144
6,606
10,810
3,438
7,373
1,142
199
746
-578
1,287
433
119
389
346
3,564
704
2,555
305
-2,276
6,606
2016
658
6,666
7,324
17
7,342
12,904
4,619
8,285
1,388
261
908
-678
1,400
552
125
332
391
4,222
721
3,130
370
-2,822
7,342
2017E
658
7,516
8,174
17
8,191
15,154
6,134
9,020
1,621
261
1,089
-678
1,655
587
141
479
449
4,777
901
3,454
422
-3,122
8,191
6 September 2016
8

Jubilant Foodworks
Financials and valuations
Ratios
Y/E March
Basic (INR)
EPS
BV/Share
DPS
Payout %
Valuation (x)
P/E
EV/Sales
EV/EBITDA
P/BV
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Debtor (Days)
Inventory (Days)
Creditor (Days)
Asset Turnover (x)
Leverage Ratio
Debt/Equity (x)
Cash Flow Statement
Y/E March
OP/(loss) before Tax
Int./Div. Received
Depreciation & Amort.
Interest Paid
Direct Taxes Paid
Incr in WC
CF from Operations
Extraordinary Items
Incr in FA
Free Cash Flow
Incr in lease deposits
Pur of Investments
CF from Invest.
Issue of Shares
Incr in Debt
Dividend Paid
Others
CF from Fin. Activity
Incr/Decr of Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2011
11.2
29.7
2012
16.5
45.5
0.0
0.0
2013
20.1
65.8
0.0
0.0
2014
18.1
84.1
0.0
0.0
2015
16.9
98.6
0.0
0.0
2016
15.0
111.3
2.5
16.7
2017E
14.0
124.2
2.5
17.8
2018E
24.5
130.6
2.5
10.2
95.7
10.1
57.2
36.0
64.7
6.7
36.5
23.5
53.2
4.8
28.3
16.2
59.1
4.0
27.5
12.7
63.0
3.3
27.0
10.8
71.4
2.8
26.2
9.6
76.1
2.6
24.9
8.6
43.6
2.1
17.1
8.2
37.6
43.9
49.3
2
8
43
3.4
36.2
42.0
57.5
2
7
41
3.3
30.5
34.9
51.3
2
6
36
3.2
21.5
23.5
31.0
2
7
38
3.1
17.2
18.1
22.3
2
8
45
3.2
13.4
14.1
16.4
2
8
47
3.3
11.3
11.9
13.7
2
8
47
3.3
18.8
19.2
23.4
2
8
43
3.8
0.1
0.0
0.0
0.0
0.0
0.0
0.0
0.0
(INR Million)
2018E
2,403
-160
1,749
0
791
-482
3,684
0
2,088
1,597
268
218
2,573
-1,000
0
193
160
-1,033
78
479
557
2011
924
-19
293
3
204
16
974
0
638
337
52
205
894
22
-10
0
-75
-62
18
70
89
2012
1,562
-58
377
0
488
-577
1,970
-41
1,132
798
159
718
1,968
22
34
0
-16
41
42
89
131
2013
1,939
-77
556
1
628
-354
2,143
0
1,834
309
170
17
2,021
16
-11
0
122
126
248
131
378
2014
1,803
-85
787
0
620
-332
2,217
0
2,357
-140
260
-3
2,615
15
24
0
226
265
-133
378
246
2015
1,615
-65
1,011
0
504
-923
2,979
0
2,748
232
221
-191
2,778
21
-2
0
-77
-58
143
246
389
2016
1,467
-110
1,282
0
483
-488
2,645
0
2,156
490
246
162
2,564
54
-126
197
130
-139
-57
389
332
2017E
1,376
-131
1,515
0
453
-446
2,754
0
2,250
504
233
182
2,664
-70
0
193
320
57
147
332
479
6 September 2016
9

Jubilant Foodworks
Corporate profile
Company description
Jubilant Foodworks is the master franchisee of
Domino’s Pizza Inc in India with 67% market share of
organized Pizza market. The Company is the market
leader in the organized pizza market with a 50% overall
market share and 70% share in the home delivery
segment in India. JFL focuses on a home delivery and
takeaway oriented business model, which offers its
customers the convenience of eating in the comfort of
their own homes and workspaces. The company also
holds master franchise of Dominos in Sri Lanka, Nepal
and Bangladesh.
Exhibit 1: Sensex rebased
Source: MOSL/Bloomberg
Exhibit 2: Shareholding pattern (%)
Promoter
DII
FII
Others
Jun-16
45.0
12.2
31.7
11.1
Mar-16
48.7
8.9
34.3
8.1
Jun-15
48.8
4.5
41.5
5.2
Exhibit 3: Top holders
Holder Name
Reliance Capital Trustee Co. Ltd.
Morgan Stanley Mauritius Company Limited
M/S NAPEAN TRADING AND INVESTMENT
CO. PVT. LTD.
Wasatch Small Cap Growth Fund
JPMorgan Sicav Investment Company
(Mauritius) Limited
% Holding
4.0
2.4
2.0
1.9
1.6
Source: Capitaline
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
Shyam S Bhartia
Hari S Bhartia
Ajay Kaul
Mona Aggarwal
Designation
Chairman
Co-Chairman
Whole Time Director & CEO
Company Secretary
Exhibit 5: Directors
Name
Arun Seth
Ramni Nirula
Name
Phiroz Vandrevala
Vishal Marwaha
Source: Capitaline
Exhibit 6: Auditors
Name
Chandrasekaran Associates
S R Batliboi & Co LLP
Type
Secretarial Audit
Statutory
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
14.0
24.5
Consensus
forecast
22.7
32.6
Variation
(%)
-38.3
-24.8
Source: Bloomberg
Source: Capitaline
6 September 2016
10

Jubilant Foodworks
NOTES
6 September 2016
11

Disclosures
This document has been prepared by Motilal Oswal Securities Limited (hereinafter referred to as Most) to provide information about the company (ies) and/sector(s), if any, covered in the report and may be distributed by it and/or its
Jubilant Foodworks
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Motilal Oswal Securities Ltd
6 September 2016
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