Just Dial’s reported revenue of Rs 1.9 bn for Q1FY18 moved up 7.8% y-o-y versus Street’s 6.6% estimate, as JD hiked prices in certain cities. Ebitda margin fell by 60 bps q-o-q to 17.1%, but surpassed Street’s 15.7% estimate.
Just Dial’s reported revenue of Rs 1.9 bn for Q1FY18 moved up 7.8% y-o-y versus Street’s 6.6% estimate, as JD hiked prices in certain cities. Ebitda margin fell by 60 bps q-o-q to 17.1%, but surpassed Street’s 15.7% estimate. The Board has approved an open market buy back up to Rs 839m at a maximum price of Rs 700/share. Management expects traffic growth led by its ad campaign to sustain which will drive revenue growth in coming quarters. However, we believe competition from Google and launch of other local apps will continue to weigh on growth. Maintain Reduce with target price of Rs 400.
Better realisation aids revenue momentum: Q1FY18 revenue growth of 7.8% y-o-y exceeded Street’ estimate as the number of paid campaigns grew by 12.0% y-o-y, while realisation rose 4.4% q-o-q though down 3.7% y-o-y. The company has also started sharing data traffic, which posted 32.5%/15.9% y-o-y/q-o-q growth. We believe JD will have to continue its aggressive advertising to sustain this. Cost rationalisation helps margins: Ebitda margin surpassed Street’s estimate on cost rationalisation, automation benefits and change in pay structures. JD expended Rs 220m on ads during quarter.
However, we see limited scope for margin expansion as the company will have to continue to invest in ads. Outlook and valuations: We believe that JD’s core business will continue to face intense competition as vertical specific apps are being aggressively advertised and Google is providing necessary business information in search results itself. At CMP, the stock trades at 19.2x FY19e EPS. We maintain ‘Reduce/SU’ with TP of Rs 400 (20x FY19e EPS).