Just Dial Research Report By Nirmal Bang Instl Equities

We had a meeting with Mr. V.S.S. Mani, chief executive officer and managing director of Just Dial (JDL) to understand its execution and rollout of Search Plus service. Post-meet, we reiterate our super bullish view on JDL. Its stock price has declined 17% over the past six months on account of various factors like: 1) Tentative equity dilution by Rs10bn, 2) Prospects of private equity investors liquidating a part of their stake of 35%, 3) Delay in rollout of Search Plus service, etc. We believe none of these concerns are serious enough to impact the business model of JDL. 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. JDL expects the commercial launch of its Search Plus service by April 2015 with one-time annual advertisement expenditure of Rs1bn. We have retained our estimates and Buy rating on JDL with a target price of Rs2,137 based on 40.0x/56.1x/13.8x FY17E EV/EBITDA, P/E and EV/sales, respectively, up 58% from the current market price.

Download Just Dial Management Meet Update 25 March 2015