Slow down not to hit co, 'buy' Just Dial: Citi

Updated: Nov 26 2013, 13:59pm hrs
We present key takeaways of Just Dial, presented at the Citi India Internet Corporate Day in Mumbai.

Plans to launch quick quote service in the next one month, which will be an enhanced service over existing best deal. In addition to competitive pricing, Just Dial believes its tie-up with local vendors should help the customer potentially get same-day delivery given their proximity.

Management believes the slowdown has little impact on the companys growth prospects given the high reliance of many SMEs on attracting business from Just Dials user queries. However, churn does go up in a slowdown as incidence of SME failure rate increases (anyways is an ongoing trend).

The company could accelerate topline from the current ~30%yoy by sacrificing margins (increase sales force; reduce target productivity metric for the sales force).

We value Just Dial at 50x Mar-15E PER (0.1x PEG; 2-year EPS CAGR). This implies a FY15E EV/Sales of 13x, which is in line with Yelp; a US based local search provider with better topline growth (55% 2yr CAGR v/s 18% for Just) but with lower profitability (6% ROE v/s 25% ROE for Just). The target multiple is at a premium to Info Edge (implied consol target PE of 32x), but justified given superior earnings growth and less vulnerability to economic cyclicality.