Just Dial - Powering Local Search Engine - Nirmal Bang

With a first-mover advantage and strong brand recall, Just Dial (JDL) has taken the top position in voice-based search and is also likely to strengthen its muscle in Internet-based search in India. By offering its existing membership packages from only 11 states to major cities across various states in India, adding more business categories and creating specialised membership packages, JDL is likely to maintain a healthy and profitable growth in the long run.

With control over employee costs, operating margin can improve significantly in the long run, while increased product offerings can provide non-linear revenue growth. JDL stock trades at 30.6x/21.8x EV/EBITDA and 48.6x/35.6x PE for FY14E/FY15E, respectively, lower than global peer Yelp Inc, which trades at 37.4x/75.8x CY14E EV/EBTIDA and P/E, respectively. The likely strong revenue/PAT CAGRs of 36.1%/43.1%, respectively, healthy free cash flow of Rs1.5bn over FY13E-FY15E and cash/share of Rs93 should command a premium valuation.

We have assigned a Buy rating to JDL with a target price of Rs800, valuing it at FY15E 42.2x/26.5x/7.5x P/E and EV/EBITDA, EV/S, respectively.

Source : Equity Bulls

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