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Change of hands, digital trend key positive…

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

* Reliance Retail Ventures Ltd will acquire 40.95% stake in JDL

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

Q1FY22 Results: JDL reported Q1FY22 results.

* Revenues declined 5.8% QoQ due to impact of Covid

* Loss at EBITDA level of | 17.2 crore due to higher ad expenses

* Just Dial made a loss at PAT level of | 3.52 crore

What should investors do?

JDL’s share price has grown by ~2x over the past five years (from ~| 553 in Jul 2016 to ~| 1039 levels in Jul 2021).

* We continue to remain positive and retain our BUY rating on the stock

Target Price and Valuation: We value JDL at | 1250 i.e. 26x P/E on FY23E EPS

Key triggers for future price performance:

* Covid and changing consumer behaviour have led to increase in virtualisation of business. Enterprises now have an omni channel presence (in physical & digital world)

* 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 1.3%

* JDL’s B2B and B2C platforms are well placed to capture this demand leading to PAT & revenue CAGR of 22% & 36%, respectively, over FY21-23E

* Change in promoters could help drive growth higher

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

* Key beneficiary of digital advertising spend

* BUY with target price of | 6,225

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