Just Dial Q3 Results Review - Strong Margin Beat, Compelling Valuation: ICICI Securities

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ICICI Securities Report

Just Dial Ltd.’s Q3 FY23 revenue grew 7.8% QoQ and 39.3% YoY. Ebitda grew 5.2 times YoY as operating margin improved by ~900 basis points YoY (400 bps QoQ).

It is now 12.3% versus our estimate of 9.4%. Ramping up of hiring in previous three-four quarters had resulted in increased employee expenses which led to lower margins over the last year but now they are quickly reverting to steady state margins as they benefit from operating leverage.

Deferred revenue increased to Rs 4 billion (up 24% YoY) led by ~6% QoQ growth in collections. Sustained improvement in collections on a sequential basis in our view is indicative of an underlying demand for their services.

Just Dial has ~26% revenue exposure to the business-to-business e-commerce segment. We believe this is likely to be the primary growth driver for the company going forward and estimate a revenue compound annual growth rate of ~28.5% in the core business over FY22- FY25E.

We expect the company to reverse its Ebitda margin losses of FY22 over FY23E-FY25E.

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