stock querry

Just Dial's business model of running a local internet search engine is a unique one and that it why it commands a premium. Also, given that the penetration of the internet is low in our country, one can say that the potential for future growth is immense.

At present, brokerages are bullish about the prospects of Just Dial.

Motilal Oswal hs nicely summed up Just Dial's advantages in their latest research report:

- High entry barriers ensure limited competition

JUST is the leader in India’s local search business and enjoys a strong first-mover advantage. It has a database of 15m listings spread across ~2,000 Indian cities as on 4QFY15, significantly ahead of competitors. We believe the biggest strength of JUST is maintenance of its database by keeping it updated and accurate through un-paralleled feet-on-street strength (~9,500 employees as of 4QFY15), its ability to develop direct and personal relationships with SMEs and its unique voice-based search infrastructure, which is difficult to replicate by competitors.

- Strong growth potential for India’s local search business

We believe JUST has significant growth potential as at 15m listings, it has still tapped less than 50% of the India’s overall base of 32m SMEs. Further, opportunity in terms of monetization is huge given only 2% of JUST’s listings are paid listings, and less than 1% of India’s SME base of 32m small businesses are paid advertisers on its platform. JUST’s proprietary pricing algorithms to set the price range for various membership packages depending on the keyword and locality as well as its unique mechanism of offering monthly/weekly payment packages ensure high affordability for SME’s which should drive higher monetization going forward.

- Search Plus, a game changer – Synergistic move, from search to transactions

JUST has extended its offerings from search to transactions with launch of a host of services under the JD Search Plus platform. JUST currently has 24 products under ‘Search Plus’ which includes online food delivery, groceries, wine delivery, doctors’ appointments, taxi bookings, online purchases of electronics, etc. Further, JUST is launching a plethora of new products like ‘Just Dial Guaranteed’, ‘Just Dial Cash’, Online cab booking, etc which we believe will take the Search Plus platform to a completely different league. Management plans to aggressively advertise to create a viral impact for these recent launches. We believe given strong relationships enjoyed by JUST with SMEs, it is best placed to capture the off-line to on-line e-commerce opportunity with its foray into enabling transactions on its platform.

Nirmal Bang is also optimistic about Just Dial:

We believe at 35.6x/24.0x FY17E P/E and EV/EBITDA, respectively, JDL – based only on its core business – is undervalued. JDL has tied up with over 300,000 service providers to provide 23 Search Plus services and is aiming to take it to over 1mn, who are expected to make payment to JDL in the coming years. JDL has also connected its search service with voice command, thereby leading to greater convenience and faster transaction execution – from 30 seconds to 2 minutes. JDL’s market-place model is strong enough to compete on pricing with established players like Amazon, Flipkart, Snapdeal, etc, with a guaranteed seven-hour delivery. In many cases, JDL is able to offer prices lower than its competitors with an added advantage of personal touch from the nearby retailer.

However, the stock is not cheap. It is quoting at a P/E of 56x the TTM earnings. Also, the inherent difficulty of such technology-driven companies is that things can change very fast. One needs to have a clear understanding of how the business model works.