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Just Dial reported very strong operating performance in 2QFY24 with c.3x YoY improvement in EBITDA that was above JMFe by 21%. Robust performance was driven by topline that grew 27% YoY (albeit on a favorable base) as well as margins that expanded 10.4ppts YoY (+390bps QoQ) to 18.7%. We reckon, topline performance was primarily driven by improved monetisation of B2B listings. Margin expansion was aided by sharp improvement in sales productivity (paid listings per sales employee grew from 44.5 in 2QFY23 to 48.6) and tight control over costs (other expenses grew only 3% YoY). Cash collections were also strong at 20.8% YoY to INR 2.78bn, whereas deferred revenue reported improvement of 23.6% YoY to INR 4.68bn. As highlighted in our recent report, we expect Just Dial’s operating performance to remain strong in the near-medium term driven by a) growing management focus on monetisation of B2B listings and b) margins moving towards to pre-Covid levels. As valuations are also compelling at 10.5x/8.5x FY25/26 ex-cash EPS, we believe the stock is poised for a sharp near-term up-move.

* Paid campaigns as well as realisations ahead of JMFe: Consolidated revenue grew 27% YoY (+5.5% QoQ) to INR 2.61bn in 2QFY24, ahead of JMFe by 2.7%. The performance was driven by additions in paid campaigns (+11.3% YoY) as well as increase in realisations (+13% YoY). Company saw net paid campaigns addition of 12.6k during the quarter (+10k/+16.3k in 1QFY24/4QFY23) to reach ~561k paid campaigns, ahead of JMFe by 4k. Additionally, average annualized realisations improved to INR18.8k (13% YoY, 3.4% QoQ), ahead of JMFe of INR 18.4k. We expect the management to re-iterate its focus on monetisation of B2B listings due to better realisations as well as relatively lower threat of disruption from verticals. Accordingly, we postulate the revenue share of B2B campaigns to increase significantly over the next 2-3 years, which would be the key driver of topline growth. That in turn could drive topline CAGR of 17.2% over FY23- FY26E, 1.7x of CAGR reported over FY15-FY20, partly aided by a low, Covid-affected base (revenue declined at a CAGR of 3.9% between FY20 and FY23).

* Strong beat on margin estimates, expect expansion to continue: Just Dial’s EBITDA in 2Q reached INR 488mn (+33% QoQ), a strong beat on JMFe by ~21%, largely attributable to higher than anticipated revenue and lower employee costs (resulting from a decrease in workforce). As a result, EBITDA margin improved substantially by 3.9ppts sequentially (+10.4ppts YoY) to 18.7%, well ahead of JMFe by ~287bps. We now expect margins to expand from 10.2% in FY23 to 23.6% in FY26 driven by controlled A&P spend, improved sales productivity and scaling back investments towards new initiatives. PAT was however a miss on JMFe by c.6% at INR 718mn, primarily due to a lower than expected treasury income that offset strong operating performance beat.

* Re-iterate BUY, TP raised to INR 950: We raise our EBITDA estimates over FY24-26 by 7- 16% and expect Just Dial’s PAT (ex-other income) to see a ~5x increase from INR 0.4bn in FY23 to ~INR 2.0bn in FY26. We now value the stock basis 18x Dec’25E core business EPS (15x earlier) + Cash to derive a Dec’24 TP of INR 950 (vs. INR 830 earlier). The stock trades at 10.5x/8.5x FY25/26 ex-cash EPS, which limits any material downside.

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