Just Dial: ‘Hold’ with target price of Rs 740

JD’s engagement matrices remain healthy marked by strong growth of 12.2% QoQ/24.7% YoY in unique visitors and mobile traffic growth of 13.3% QoQ/35.5% YoY.

Written by Edelweiss

July 25, 2019 02:38 IST

Just Dial, Just Dial target price, EBITDA, EBITDA margin, Just Dial revenue

Importantly, unearned revenue growth, a lead indicator (for revenue), plunged to 7.5%, from 21.7% in Q4FY19, as weaker business confidence led to businesses going for monthly listings over annual.

Just Dial (JD) reported a mixed Q1FY20: Revenue rose 13.6% YoY (in line with Street’s expectation) while EBITDA margin disappointed at 24% (lower than Street’s 27% expectation). Importantly, unearned revenue growth, a lead indicator (for revenue), plunged to 7.5%, from 21.7% in Q4FY19, as weaker business confidence led to businesses going for monthly listings over annual. We believe the mushy macroeconomy is likely to weigh on businesses’ advertisement expenses, which would impact JD’s revenue growth. In this backdrop, we are keeping the target multiple unchanged. In a favourable macroeconomic environment though, we would expect revenue growth and realisation to improve considering sustained mobile unique visitor growth (up 35.5% YoY). All in all, we are downgrading the stock to ‘HOLD’ with a TP of INR740 (from INR680) as we roll over to Q3FY21.

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JD’s engagement matrices remain healthy marked by strong growth of 12.2% QoQ/24.7% YoY in unique visitors and mobile traffic growth of 13.3% QoQ/35.5% YoY. Paid listings rose 2.9% QoQ/13.8% YoY while realisations were flat. The company is driving listings growth by focusing on tier 3 and 4 cities and hence added ‘feet-on- street’. We believe that in a more favourable macroeconomic environment, the company would be able to monetise listings growth much better considering the improvement in engagement matrices.

EBITDA margin dipped 130bps QoQ to 24% — adjusting for IND AS-116 accounting change — on account of higher advertising expenditure (INR190mn versus INR170mn in Q4FY19). The company is investing in feet-on-street in tier 3 and 4 cities, which is likely to keep EBITDA margin at current level in absence of stronger revenue growth.

This article was first uploaded on July twenty-five, twenty nineteen, at thirty-eight minutes past two in the night.