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Looking to reach pre-pandemic paid campaigns in FY23

About the stock: Just Dial (JDL) generates revenues from advertisers on various subscription and fee-based packages.

* Reliance Retail Ventures now holds a 67% stake in JDL

* JDL’s launch of B2B platform will be a key revenue driver in the long run

Q2FY23 Results: JDL reported strong numbers in Q2FY23.

* Revenues grew for a second straight quarter with 10%+ QoQ growth to | 205.3 crore

* Paid campaigns were up 4.2% QoQ and realisation was up 6.2% QoQ

* Adjusted (ex-Esop) EBITDA grew 360 bps QoQ to 9.5% to | 19.5 crore

What should investors do: JDL’s share price has grown by ~1.5x over the past five years (from ~| 412 in October 2017 to ~| 600 levels in October 2022).

* We change our rating from HOLD to BUY

Target Price and Valuation: We value JDL at | 715 i.e. 23x P/E on FY25E EPS.

Key triggers for future price performance:

* Continued increase in paid campaigns as well as realisation growth

* Ramp up in sales team is expected to drive revenue growth in both B2B and B2C businesses

* JDL will be a key beneficiary of this shift of advertising to digital medium and underpenetrated MSME (B2B) segment. The paid subscribers as a percentage of total MSME is just 1.5%

* JDL’s B2B and B2C platforms are well placed to capture this demand leading to revenue CAGR of 21% in FY22-25E

Alternate Stock Idea: Apart from JDL, in our IT coverage we also like Affle.

* Key beneficiary of digital advertising spend

* BUY with a target price of | 1,295

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