Reduce Just Dial For Target Rs.550 - Yes Securities
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Operating margin remains weak
Our view and valuation
Overall, it reported mixed performance for the quarter. While revenue growth was inline, the operating margin for the quarter was below expectation. The pickup in sequential revenue has been achieved with higher investment in sales; and focus on monthly plans. The pickup in the addition of paid campaigns is expected to remain robust in near to medium term. We expect that EBITDA margin would remain subdued in FY23 before picking up in FY24 as it invests in sales network and content enrichment to put the core B2C business back on growth trajectory. The B2C segment continues to face high competition from Google, Facebook and other vertical and horizontal players. The B2B segment is being scaled up and the current focus is to invest in better quality content that will drive traffic flow, leading to better monetization. We estimate revenue CAGR of 26.8% over FY22?FY24E with average EBIT margin of 12.8% over FY22?24E
We maintain REDUCE Rating on the stock with revised target price of Rs 550/share based on DCF valuation. Trades at PE of 19.5x on FY24E EPS.
Result Highlights
* Reported revenue of Rs 1,856mn, ( up 11.4% QoQ, up 12.2% YoY ), led by 5.2% QoQ growth in the average number of paid campaigns , and 5.9% QoQ growth in the number of average revenue per paid campaigns.
* EBITDA margin increased by 820 bps QoQ to 4.5%( compared to average EBITDA margin of 23% in FY21)
* Other income was down to Rs (600) mn, impacted due to mark to market losses on treasury portfolio owning to significant increase in bond yields, and this led to net loss of Rs 484mn in the quarter( vs net profit of Rs 221 mn in Q4FY22)
* Number of paid campaigns( end of period) increased by 4.8% QoQ to 484k, led by focus on monthly plans
* Total number of listings grew by 2.7% QoQ to 32.8mn
* Added 763( up 5.7% QoQ) employees in the quarter to 14,106 employees as of June 30.
* Cash and Investments stood at ? 37.4bn as on June 30, 2022 compared to ? 15.3 bn as on June 30, 2021 and ? 38.2bn as on March 31, 2022
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