Our FY16e estimates are 15% above consensus. The sharp run-up in the stock price has been a concern, but we think the market is not fully pricing in the potential upside from new initiatives and geographical expansion, and valuing Just Dial solely on its local search capabilities.
Just Dial is the market leader in the local search business in India (11 million listings, 250,000 paid clients and 118 million visits per quarter). Until now, its approach has been low tech and labour-intensive, with voice as the key driver; this was in line with the requirement of its customers, dominated by Indias SMEs, which score low on technology.
We believe the speed at which the company can transform its business model to leverage rising internet growth will be the single most important factor in its development, as this will determine its share of growing online ad spend, which we expect to account for 14% of the overall market by FY18e, up from 7% today.
That said, we view recent initiatives such as Shopfront and Search Plus as steps towards capturing increasing mobile traffic and, therefore, forecast a 37% revenue CAGR over the next three years. Separately, we acknowledge the stock has scarcity value, as there are few listed internet companies, a fact that allows Just Dial to command a significant premium.