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Multipie Weekly #11: Curated reads for investors

Hello, we are back with 15th edition (11th on blog) of our weekly newsletter. But before that, note that our annual report tracker is now updated with over 800 annual reports and we will be sharing some insights on Q1 results on our Twitter page today.

In this weekly, we share we highlight how the equity market flows saw a turn this week, share Visual Weekly highlights, look deeper at why we think Jubilant Foodworks is a FoodTech player. At the end, have shared few good reads and recommended videos to watch.

You can check our previous weekly here. Please subscribe if you haven’t! Let’s start.

1. Market snapshot for the week

It was a top turvy week for investors, but Nifty managed to close above 16,500 levels for the first time! Information Technology outperformed with 3.9% gains during the week and 11.3% over the last month. Commodity and materials which has been the best performing sector over last 6 months saw some softness with -1.1% correction last week.

It is interesting to note that while NIFTY 50 gained 1.7%, all other segments by market cap (ex-NIFTY stocks) closed in red. Also, there are some early signs of reversal across small & midcap, which have outperformed over the last 6 months.

2. Visual weekly – Some interesting charts and data

2.1 China is the gigafactory of the world for new energy

Out of 270 gigafactories globally, 160 are located in China(!), leading to over 70% market share of China in global battery and components! India has none so far.

2.2  Total stress assets across Banks and key NBFCs – SBI has lower combined stress than all private Banks!

2.3 The rising trajectory of EBITDA/ ton and spreads for Jindal Steel and Power

The boom in Iron ore and steel prices reflects clearly in the EBITDA for JSPL in recent quarters. You can read more on reasons and implications of the metal commodity boom from our earlier newsletter here.

2.4 RBI MPC updates: If the economy grows 9% this fiscal, the economy will still be 7% below it’s pre-pandemic levels

Extracts from JP Morgan’s note on RBI’s monetary policy, which indicates that while higher than earlier expected inflation is visible, RBI hopes it is transitory from supply-side shocks and is focusing on reviving growth.

3. Jubilant Foodworks hires CIO. Why Domino’s a.k.a Jubilant Foodworks is a modern monopoly?

Last week, Jubilant Foodworks announced hiring of Ekhlaque Bari as their Chief Information Officer. He was earlier the CTO and Head of Analytics at Fullterton India. In this short note, we cover Jubilant’s tech prowess and explain why we believe it is a modern monopoly.

Domino’s was recently in the news for sponsoring lifetime free pizzas for the Olympic silver medalist Mirabai Chanu. Apart from an affordable price point and strong marketing play, there are other aspects that make Domino’s a modern monopoly and a FoodTech in reckoning along with Zomato and Swiggy.

But first, what is a modern monopoly? One key tenet of the book Modern Monopolies is understanding who really owns the customer.

Is it the merchant or is it Amazon?
Is it the restaurant or is it Swiggy/ Zomato?
Is it the Insurance company or is it the online aggregator (Policybazaar)?
Is it the multiplex or is it Bookmyshow? 

Hope you get the drift. The answer lies in this quote from an article I recommend ‘Own the Demand’:

If given the choice to own all my inputs except demand, or own only demand and no other input, I’d pick the latter in a heartbeat. 

Let's focus on the restaurant business. There are two models here - Platform-to-Customer (P2C) and Restaurant-to-customer (R2C)

In the P2C model, the platform (Swiggy/ Zomato) owns both the ordering and delivery process – effectively owning the customer. In a R2C model, the ordering may be done via platforms or directly through a restaurant website or app, but the restaurant itself takes care of the delivery. Domino’s is one of the few that fall in the R2C category. While it has made its menu available on food-delivery apps for lead-generation, it still delivers every single order on its own. No wonder they had the confidence of saying – 30 minutes or free!

Now let’s come to the interesting part – total app downloads for Domino’s Pizza has grown to 64 MN  in June 2021 from 12.7 MN in March 2018, growing ~5x in the last 3.25 years (72% CAGR), making it the third-largest food delivery app in India after Zomato and Swiggy. Their online business is growing faster than the two, while having superior unit economics which is supported by growth in online orders as a percentage of sales. 

Takeaway: While they always owned the delivery, Domino’s now also controls its lead generation - thus fully owning the demand and the customer!

How does Domino’s fund its delivery network? 

The answer lies in this interesting podcast “Breaking Down the Food ecosystem” between Patrick O’Shaughnessy and Zack Fuss and I quote: Domino’s high gross margins (15% higher than say burgers, due to low cost of dough, cheese, and sauce) allow it to fund its own delivery network.

This is a distinct technology edge in the QSR segment that allows Domino’s (Jubilant Foodworks) to control the ordering, preparing and delivery process, thus truly owning their customers and the demand!

Anyone interested in understanding the strength of their business model should search for “Domino’s” in the podcast’s transcript here.

Domino’s – owning the demand 

Pizza is the second-largest category for QSRs (27%) after Burgers & Sandwiches in India. Domino’s holds a dominant position in pizza (burger has higher competition). Domino’s India store network stands at ~1,400 vs nearest competitor Pizza hut at 470. The dominance reflects in the fact that Pizza Hut shut down 300 outlets globally. Recently, Domino’s has also entered another fast-growing category – Biryani with their own Ekdum! brand. A strong control over demand makes it easier for them to ramp-new categories.

Note: This is not a buy/ sell analysis for Jubilant Foodworks, which requires analysis of multiple other factors.

4. Good reads and other news

1. Tata Group to manufacture semiconductor: Can unlock $1 trillion in GDP

  • Large scale semiconductor chip shortage has recently hit the Automotive industry hard
  • Tata group Chairman N. Chandrasekaran announced Tata’s foray in the semiconductor market, saying it could unlock a $1 TN electronics opportunity for India!
  • The work will happen under a separate Tata group subsidiary 
  • Randhir Thakur, ex director at Intel (largest semiconductor chips manufacturer globally) has joined Tata Electronics as a Director

    2. White Knight crypto hackers return most of the $600 MN Crypto tokens
  • In an interesting turn of events, Poly Network, a DeFi platform that facilitates peer-to-peer token transactions, saw the biggest Crypto heist ever by a hacker dubbed as “Mr. White Hat” , who then returned almost all of it!
  • Total token hacked was $611 MN (Ethereum: $273M, Binance Smart Chain: $253M, Polygon: $85M)
  • The hacker then published a note on his motive

    3. HDFC Securities to start low-cost brokerage platform
  • HDFC Securities is taking on the discount brokers head on!
  • It’s new low-cost discount broking platform offers three-in-one account, with key differentiator being that users will be able to link their trading account with both demat and bank account

    4. Recommended videos of the week
  • Samir Arora’s interview on new age internet IPOs – enjoyed his sugarcane juice analogy, with the first cycle of juicing by insiders and second round by PE/VC investors, with balance being for public market investors 😀
  • Rajiv Thakkar of PPFAS simplified the ‘mumbo-jumbo’ around Blockchain, Crypto and DeFi

5. Tweet of the week

That’s all for this week. Please share with your peers if you found this helpful and subscribe at multipie.co to start receiving these as a weekly digest every weekend!

Have a great weekend!

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