Just Dial: Is the fall overdone?

Slowing growth in paid campaigns also impacted Just Dial's revenues in the December quarter, which grew 11% year-on-year (y-o-y) to Rs 171 crore, its lowest growth since listing

Just Dial has witnessed moderating revenue growth over the past few quarters due to intensifying competition from portals such as Zomato, Practo, Uber, Ola and BookMyShow. Though Just Dial has a strong presence in voice search medium, more of its searches are now on the mobile/internet platforms, which have intense competition from segment-focused and multiple-classifieds portals. The low-profile launch of Search Plus app also means Just Dial is giving its competitors some ground, say analysts.

"Long-term benefit of investments in Search Plus will be difficult to attain, as the best placed segments of Search Plus have bigger and more meaningful players like Uber, Ola, Zomato, etc," says Soumitra Chatterjee of Spark Capital.

Slowing growth in paid campaigns also impacted Just Dial's revenues in the December quarter, which grew 11 per cent year-on-year (y-o-y) to Rs 171 crore, its lowest growth since listing. Weak revenues pulled down ebitda margin by 1,070 basis points (bps) y-o-y to 21.8 per cent. Despite higher other income and lower tax rate, net profit fell 16 per cent y-o-y to Rs 27 crore. Revenues and net profit were both lower than the Bloomberg estimates of Rs 182 crore and Rs 36 crore, respectively.

After the dismal results, analysts have toned down their expectations. "We factor in execution slippages - lower revenue growth and margins, and cut down our Search Plus estimates further. We downgrade Just Dial to 'Reduce' from 'Buy', with a revised target price of Rs 710 (Rs 1,000 earlier)," said Kawaljeet Saluja of Kotak Institutional Equities.

The management though remains positive. VSS Mani, founder and CEO, Just Dial, says, "Once the top line growth comes back to the normalised 20 per cent, the margin issue should be taken care of (rising to 30-31 per cent)." But, this turnaround will take a few quarters. The Street, though, is not convinced, given the 22 per cent fall in stock price in past two sessions after December quarter results, taking it to a new 52-week low of Rs 601.70.

Though the Search Plus app enjoys critical mass, monetisation remains key. Investors are better off waiting for the performance to stabilise despite inexpensive valuations.