'Buy' ratings on Just Dial as growth in line with expectations: MOFSL

Updated: Feb 6 2014, 19:02pm hrs
Just DialJust Dial?s net sales for Q3FY14 stood at Rs 11.99 crore compared to Rs 9.52 crore in Q3FY13.
Just Dials net sales for Q3FY14 stood at Rs 11.99 crore compared to R9.52 crore in Q3FY13, a y-o-y growth of 25.9%, primarily driven by a 27.9% rise in paid subscriber base to 2,49,600 from 195,100.

Just Dial Ltd has taken a price increase in certain segments across premium and non-premium categories, highlighting its pricing power. Ebitda margin for Q3FY14 stood at 27.8% against 25% in 3QFY13, up 280bps, primarily driven by a 350-bps reduction in other expenses due to lower ad spends during the quarter.

Due to strong margin expansion and higher other income, PAT for the quarter stood at R2.98 crore compared to R1.6 crore in Q3FY13, marking a growth of 85.7%.

Just Dial reported campaign additions of 10,950 for Q3FY14 compared to 15,000 and 17,150 subscriber additions in Q1FY14 and Q2FY14, respectively.

However, this reduction in the run rate is primarily due to rollback of zero down payment friction-free contracts, which were done to drive the quality of sign-ups. The company has guided that it would increase its feet on the Street by adding 600 workforce every quarter.

Just Dial launched more than 10 new products in Search Plus, which currently has 85,000 sign-ups. The initial response to JD Search Plus has been encouraging.

Given a 26% sales CAGR and 45% PAT CAGR over FY13-16E, we believe the next round of re-rating and upgrade in earnings will be driven by success of JD Search Plus. The stock trades at 77x FY14E, 57x FY15E and 43.7x FY16E earnings, respectively. We value Just Dial at 50x FY16E EPS of R29.5. Maintain 'buy' with a target of Rs 1,475.