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Business performance remained muted in the quarter

Our view

Overall, the performance was below expectation both in terms of financial and operating metrics as the B2C segment continues to face high competition from Google, Facebook and other vertical and horizontal  players. The gradual improvement in the financial situation of SMEs after the 2nd covid wave should drive addition in the number of paid campaigns. The B2B segment is being scaled up and will take some before it supports financial performance meaningfully.   We maintain REDUCE on the stock with revised target price of Rs  825/share.

Result Highlights

* Reported revenue of Rs 1,589 mn( up just 1.9% QoQ), led by increase in the number of paid campaigns by 1.5% QoQ( below expectation) and increase in average realisation by around 0.5% QoQ.

* EBITDA margin declined by 690 bps QoQ to 3.3%. The decline in EBITDA margin was led by muted revenue growth and around 9% sequential increase in employee cost( 82% of total revenue)

* The number of paid campaigns increased by ~6k QoQ to 437k and this recovery has been muted for the company

* The number of total  listings increased by 1.3% QoQ to 31.4mn

* The number of unique visitors declined by 4% QoQ to 142.7 mn

* App downloads per day was down 8.4k per day in Q3 compared to 8.9k in Q2FY22.

* Cash and investment is almost flat QoQ at Rs 37.7bn.

Valuation

The stock trades at PE of 23.4x on FY24E EPS. The B2C segment continues to show muted recovery from 2nd covid wave; while B2B segment is still in nascent phase. The broad strategic plan after its acquisition by Reliance Retail is still awaited. We  value the stock with DCF based target price of Rs 825/share.

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