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Muted quarter; expect 2H to be better than 1H

Just Dial reported muted revenue growth of 9.3% YoY in 2QFY25, a miss on JMFe by 2% and well below management guidance of mid-teens growth. Both paid campaigns and realisation were lower by c.1% vs. JMFe. As a result, EBITDA of INR 821mn (+68% YoY) too missed our estimate by 3%. Cash collections growth was also soft at 8% YoY, albeit on an absolute basis it did expand ~10% QoQ. Moreover, traffic growth accelerated to 15% YoY despite not much change in A&P spends. We believe sequential acceleration in collections and improved traffic trends should help accelerate topline growth in 2H, and forecast revenue growth of ~11.5% YoY in FY25. Moreover, the company’s plans to distribute full year profits/cash generated to shareholders should support the stock as yield on payouts could be >5% at CMP (basis FY25 estimates). Ex-cash and other income, Just Dial trades at 19x/14x FY26/27 PER a significant discount to IndiaMART (SELL, INR 2600) which trades at 40x/34x, despite converging growth profile. We roll-forward to Dec’25 for a revised TP of INR 1,350 (INR 1,300 earlier).

* Muted topline growth in 2Q, but expect growth to accelerate in 2H: Revenue grew 9.3% YoY (+1.5% QoQ) to INR 2.85bn, a miss on JMFe by c.2%. Sequential paid subscription additions moderated to 6.8k from +8.0k/+12.6k in 1QFY25/2QFY24, thereby missing JMFe of 8.8k, whereas average realisation stood at INR 19.1k vs. JMFe of INR 19.5k. However, collections growth improved to 7.9% YoY (versus 5.4% YoY in 1Q) and was up ~10% QoQ, likely indicating a better revenue trajectory in 2H. We forecast revenue CAGR of 11.7% over FY24-FY27, 1.2x of CAGR reported over FY15-FY20, factoring in steady increase in paid campaigns as well as realisation in recent quarters.

* Robust margin expansion driven by a favourable base: Just Dial’s EBITDA margin in 2Q expanded 10.1ppts YoY (+7bps QoQ) to 28.8%, broadly in line with JMFe of 28.9%, on the back of a favourable base and strong operation leverage. Employee costs (as a % of revenue) were down 10 ppts YoY due to recent rationalisation of workforce across sales as well as non-sales functions, while other expenses (as a % of revenue) were down 50bps due to tight control over A&P spends. As a result, EBITDA growth was robust at 68.3% YoY to INR 821mn (+1.8% QoQ); however, it missed JMFe by 2.7% on account of lower-than-expected topline growth. Other income grew ~2x YoY to INR 1.1bn due to higher MTM gains aided by declining bond yields, whereas ETR stood at 15.1%. PAT stood at INR 1.5bn, ahead of JMFe by c.15% led by higher-than-expected treasury gains.

* Roll forward TP to INR 1,350; maintain BUY: We reduce our topline estimates by 1.8- 4.7% over FY25-27, to factor in lower-than-expected revenue growth in 1HFY25. However, we raise EBITDA margin estimates by ~15-140bps over FY25-27 as costs are unlikely to increase meaningfully here-on and expect Just Dial’s core PAT (i.e., ex-other income) to expand by ~2.4x from INR 1.3bn in FY24 to ~INR 3.1bn in FY27. We roll forward to Dec’25 and value the stock basis unchanged multiple of 20x core business EPS + Cash to derive a revised TP of INR 1,350 (vs. INR 1,300 earlier).

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