Reiterate ‘buy’ on Just Dial with a target price of R1,930 (earlier R1,985). Our target continues to be based on SoTP valuation of R1,410 for core search (30x FY19F EPS discounted to one-year forward) and R520 for the marketplace business (1x GMV discounted up to one-year forward).
At the current price, the market is not according any material value to its Search Plus offering, in our view, and we believe the current price level is attractive.
The recent fall is an opportunity to accumulate. The stock has corrected by ~25% since its above-expectation Q3FY15 results, which we believe is due to fears of: 1) private equity (PE) investors (which hold ~35% stake) trimming positions to fund private ventures; 2) higher- than-anticipated spends on advertising on its Search Plus offerings; and 3) uncertainty on execution in Search Plus services.
After interacting with management, we came back reassured on our positive stance as we see strong traction in its local search business (26% CAGR over FY15-19f, on our estimates), as it leverages its leadership position and derives synergies from Search Plus offerings; and value in its Search Plus and marketplace business, a play on India’s e-tailing growth story (which on our estimates is likely to grow 11x over the next five years).
Overall, we forecast revenue CAGR of 31% and adjusted EPS CAGR of 39% over FY15-19f.