Just Dial rallies 16% in four days after strong Q3 earnings; should you buy now?

Shares of Just Dial broke a four-day winning streak on Friday as they traded lower by 3 percent at ₹657 apiece. The stock had gained 16 percent in four trading sessions –  from Monday to Thursday, rising from ₹585.75 apiece to ₹678. 

The sharp gains came after the company posted strong earnings for the December quarter with a three-fold jump in its consolidated net profit at ₹75.32 crore. The company had posted a net profit of ₹19.39 crore in the corresponding quarter of the last fiscal. Sequentially, the net profit was up 44.4 percent.

However, the stock has fallen 16.76 percent in the last one year, tumbling from ₹924.40 to Thursday's closing price of ₹678. After hitting a one-year high of ₹957.6 in April last year, the stock witnessed selling pressure and had fallen 44.31 percent in just two months to June to hit a new 52-week low of ₹520. 

At current levels, the stock is trading 30 percent above its one-year low and 29 percent below its one-year high.

Just Dial is a small-cap stock with a market capitalization of ₹5,720.2 crore. The company provides a host of local search, search-related services, and software services to users in India through multiple platforms such as the Internet, websites, mobile internet, and more. The company offers services in more than 250 cities, its website shows.

The revenue from operations during the third quarter of FY23 rose 39 percent to ₹221 crore from ₹159 crore in Q3FY22. The company reported an EBITDA of ₹27.2 crore. The adjusted EBITDA margin increased 380 bps QoQ to 13.3 percent and 900 bps YoY due to growth in revenue and operational efficiency.

During the quarter, the company's paid campaigns increased by 18,040 to 521,880, up 3.6 percent QoQ, while the average per paid realisation grew 4.1 percent QoQ to Rs. 4,242. The company reported that the top 11 cities contributed 42 percent of the paid campaigns and 62 percent of revenue.

On the pricing front, JDL indicated the price of paid campaigns in tier I cities is higher by 30–35 percent compared to tier II cities. Further, the company stated that there is huge potential to increase paid campaigns in the medium to long term.

On campaign additions, the company said that its paid campaign additions were strong in the last four to five quarters, in the range of 10,000 to 20,000 additions per quarter.

Just Dial stated that total traffic of unique visitors for the quarter increased by 9.8 percent to 15.68 crore on a YoY basis, with 85.5 percent of traffic originating on mobile platforms, 10.9 percent on desktop and PC, and 3.6 percent on its voice platform.

Following the company's solid Q3 number, brokerage firm ICICI Direct Research has maintained its “buy” rating on the stock with a target price of ₹760 apiece.

JDL will be a key beneficiary of shift in advertising to the digital medium and underpenetrated MSME (B2B) segment. The paid subscribers as a percentage of total MSME are just 1.5 percent, said ICICI.

JDL’s B2B and B2C platforms are well placed to capture this demand, leading to a revenue CAGR of 23 percent in FY22–25E, it added.

The brokerage expects a continued increase in paid campaigns, as well as realisation growth and ramp-ups in the sales team will drive revenue growth in both B2B and B2C businesses.

Meanwhile, on December 21, Just Dial's promoter, Reliance Retail Ventures, a subsidiary of Reliance Industries, sold a 2 percent stake in the company for ₹101 crore, as per stock exchange data. 

Post-transaction, the shareholding of promoter and promoter group entities has come down to 74.98 percent from 76.98 percent.

09 analysts polled by MintGenie on average have a 'buy' call on the stock.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.