HDFC Securities' research report on Route Mobile
Route reported better-than-expected results with revenue growth of 2.3% QoQ and margin expansion in a seasonally weak quarter. The billable transactions declined 1.1% QoQ, owing to seasonality and weak MRM, more than offset by better realisations. Rate hike in the ILD segment (~25% in April-23), volume growth in NLD and market share gains, new client additions, firewall deal in Sri Lanka (going live in May-23) and UCaaS deployment for Robi Axiata (Bangladesh) provide growth visibility for FY24E. The rate hike in NLD (proposed) and the launch of new products like TruSense (identity and fraud detection) appear promising and will aid growth. We believe Route will be able to deliver ~18% organic growth in FY24E, following a strong FY23 (organic growth of 41%), led by strong tailwinds in the domestic termination business and expansion of international operations.
Outlook
We revise our EPS estimate by +0.2/+0.7% for FY24/25E and maintain our BUY rating with a TP of INR 1,735, based on 25x Dec-24E EPS. The stock is trading at 23x FY24E EPS (~17% below its 1Y average).
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