Just Dial’s (JD) Q4FY17 revenue at Rs 1,817 million (up 5.9% y-o-y) came below Street’s 17.7% growth estimate due to dip in realisation. However, EBITDA margin jumped 340bps q-o-q to 17.7% above Street’s 14.5% estimate on account of cost rationalisation and absence of ticketing platform cost during the quarter.
Management expects to revert to double digit revenue growth in a couple of quarters riding advertising campaign and traction in the JD lite App. However, we remain unenthused due to absence of revenue traction despite addition of 1,000 sales personnel during FY17 and intensifying competition as Google has launched app for local goods and services. Maintain ‘Reduce’ with Rs 400 TP.
Q4FY17 revenue growth of 5.9% y-o-y was way below Street’s 17.7% estimate impacted by 1.6% q-o-q and 5.9% y-o-y realisation dip due to rise in revenue contribution from tier-II cities. We expect realisations to remain under pressure as JD is finding it difficult to raise rates without improvement in traffic share.
Paid listings/campaigns grew 2.5% q-o-q and 18.0% y-o-y. Margin, at 17.7%, expanded 340bps q-o-q on account of cost rationalisation and absence of expenses related to ticketing platform. We see limited scope of margin expansion as the company will continue to invest in advertising.
JD finally commenced its much anticipated advertising campaign in March and is seeing higher app download and better user engagement. However, the company will have to demonstrate the increased value proposition to customers and hence we envisage monetisation to take some time. It is yet to finalise strategy for the relaunch of its JD Omni platform. Ergo, onus of revenue growth will be on the core search business.
JD’s core business continues to face intense competition with vertical-specific apps gaining popularity and Google providing necessary business information in the search results itself. The stock is currently trading at 24.5x FY19E EPS.