Advantages like speed of delivery, delivery from a local, known vendor and no inventory risk make JustDial a viable marketplace. In addition, shop front and marketplace services provide a credible defence to SMEs against competition from ecommerce portals. We estimate ~13% and 24% contributions from search plus and marketplace services to JustDials FY16 and FY17 revenues, respectively.
We value JustDial at 52x FY16E PE. This is above the average PE (36x FY16E) multiple for peers but reflects JustDials above-industry average revenue and earnings growth, PEG of 1.1 (in line with sector peers), strong positive free cash flow and high ROE, which we forecast to continue improving. Risks include competition from larger search engines and online marketplaces.