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Margin drives EBITDA beat, subscription trends a concern

Just Dial’s accelerated margin recovery towards pre-Covid levels continued as it reported the 7 th consecutive quarter of sequential margin expansion, a cumulative improvement of 26.5ppts. In 3QFY24, margin improved 4.1ppts QoQ (+10.5ppts YoY) to 22.8%, a beat on Cons/JMFe by c.250bps/280bps, on the back of strong cost control. Revenue growth was also decent at 19.7% YoY (1.7% QoQ), albeit it missed JMFe/Cons. by 1.3%/1.8%. However, paid subscriber additions (+8.6% YoY), cash collections (+10% YoY) and unique visitor traffic (+5.8% YoY) trends were not very encouraging. We believe this slow-down is partly due to focus on profitability and expect the management to re-focus on growth acceleration in the coming quarters. While the stock has seen 20%+ up-move since our upgrade (Favourable risk-reward, upgrade to BUY), valuation still remain compelling at 14x/10x FY25/26 ex-cash EPS.

* Decent revenue growth, but paid subscriber addition slows: Consolidated revenue grew 19.7% YoY (+1.7% QoQ) to INR 2.65bn in 3QFY24, a marginal miss on JMFe by 1.3%. Growth was aided by both paid campaign growth (8.6% YoY) as well as increase in realisation (8.9% YoY). Net paid campaigns additions stood at 6.1k during the quarter (+12.6k/+18k in 2QFY24/3QFY23), resulting in paid campaigns going up to ~567k, a miss on JMFe by 3k. Average annualised realisation stood at INR 18.8k (9% YoY) roughly in line with JMFe. We expect the management to reiterate its focus on monetisation of B2B listings due to better realisation 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. We expect 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).

* Accelerated margin expansion drives EBITDA beat: Just Dial’s EBITDA grew to INR 604mn (+122% YoY / +23.8% QoQ) in 3Q, a beat on JMFe by 12.3% on the back of decent revenue growth and strong cost control over employee costs and G&A expenses. As a result, EBITDA margin improved 10.5ppts YoY (+4.1ppts QoQ) to 22.8%, ahead of JMFe by 276bps. Better-than-expected operating profit and treasury income led to a PAT of INR 920mn, ahead of JMFe by 16.5%. Going ahead, while we expect company to refocus on growth, we see margin expanding to 25.3% by FY26, driven by improving sales productivity and scale-back of investments towards new initiatives.

* Maintain BUY, roll forward and earnings upgrade leads to TP of INR 1,010: We raise our EBITDA estimates over FY24-26 by 7-11% and expect Just Dial’s core PAT (i.e., ex-other income) to increase by ~5x from INR 0.4bn in FY23 to ~INR 2.1bn in FY26. We roll forward and value the stock basis 18x Mar’26 core business EPS + Cash to derive a Mar’25 TP of INR 1,010 (vs. INR 950 earlier).

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CIN Number : L67120MH1986PLC038784