We reiterate our top pick rating on Just Dial and maintain a positive stance with a buy rating. We raise our target price to Rs 1,985 (earlier Rs 1,920) on roll-forward to September 2016 and continues to be based on sum-of-the-parts (SoTP) methodology ? local search business at an exit multiple of 30x FY19f core earnings of $78 million discounted back to September 2016, to arrive at a valuation of ~Rs 1,490 per share. Marketplace business at a multiple of 1x FY19f GMV discounted back to a year from now, to arrive at a valuation of ~Rs 495 per share. Our target implies P/Es of ~65x for FY16f (EPS: Rs 30.6) and 46x for FY17f (EPS: Rs 42.5), which are in line with its historical range (1-year average forward P/E of 55x since mid-2013).
Following our meeting with Justdial CFO, we reiterate our positive stance on the stock on strong traction in its local search business (27% CAGR over FY14-19f on our estimates), driven by its leadership position and synergies from expansion into Search Plus services. Its marketplace business is a play on India?s e-tailing growth story (which in our estimates is likely to grow 11x over the next five years). Overall, we forecast a revenue CAGR of 31% and an EPS CAGR of 37% over FY14-17f.
Justdial has 20 Search Plus services live on its website, and within the next one to one-and-a-half months, all these services should be live on mobile as well. The management believes it is possible to increase paid listing penetration in its local search business to 4-4.5% (versus 2% of overall listings being paid in Q1FY15) over the next 3-5 years.
Nomura