Buy Just Dial; target of Rs 600: ICICI Securities

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ICICI Securities research report on Just Dial

With collections in the month of April and May being ~40% of pre-Covid levels, we expect revenues for Just Dial (JD) to decline by ~25% QoQ in Q1FY21. For FY21, we are projecting a revenue decline of 22%. However, right sizing of cost structure should ensure that EBITDA margin remains unchanged YoY in FY21 at around 28-29%. JD should barely burn cash in Q1FY21 in our opinion and can potentially deliver higher absolute FCF in FY21 than ~Rs1.25bn generated in FY20. FCF in FY20 got impacted on account of pivot in strategy to focus on selling more monthly ECS packages, which though dilutive for collections (and therefore FCF) are accretive to revenue growth (on account of lower discounting). JD should emerge stronger once normalcy resumes post Covid given - 1) permanence to some of the cost initiatives which should ensure higher profitability whenever revenue recovers to pre-Covid levels, and 2) as the company is taking Covid driven pause to repurpose workforce to enrich B2B content with a dedicated B2B portal to be launched shortly.

Outlook

Maintain BUY with a DCF based target of Rs600. Current EV can be recovered through NPV of the next 5-6 year free cash generation itself.

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