Buy Route Mobile; target of Rs 1820: Emkay Global Financial

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Emkay Global Financial's report on Route Mobile

ROUTE is a leading player in Communications Platform as a Service (CPaaS) with strong relationship with telecom operators, particularly in the Indian subcontinent, MEA and LatAm regions. Strong industry tailwinds (~30% CAGR over 2020-25E), presence in fast growing markets and new product expansions should drive revenue/EBIT/EPS CAGRs of 25%/33%/34% over FY21-24E. ROUTE's EBITM is expected to expand ~210bps over FY21-24E on the back of operating leverage with growing scale and increasing revenue share from new more profitable engagement channels and products. Global scale, direct reach with over 265 MNOs and access to over 800 mobile networks enable ROUTE to offer flexibility of multiple routes, swift delivery and lower cost of delivery per message, driving strong value proposition to clients and better mining.

Outlook

We initiate coverage on the stock with a Buy rating and a TP of Rs1,820 at 44x Jun'23E EPS (backed by our long-term DCF analysis), considering favorable industry tailwinds, asset light business, strong earnings profile (~34% CAGR over FY21-24E), return ratio (>25% ROE) and cash generation (~100% FCF/profit).

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