Just Dial to continue good show on solid biz model: JM Fin

Just Dial on Wednesday had a spectacular move, touching a lifetime high with its marketcap crossing the Rs 8,000 crore. Jaisinh Suchak, VP of JM Financial spoke to CNBC-TV18 on what should a retail investor do with the stock now.

According to Suchak, the solid business model of Just Dial including plenty of investor interest, especially offshore, growth potential with new launches will allow the company to continue with its good track record going ahead. He places a price target of Rs 1,250 on the stock. Below is the verbatim transcript of Jaisinh Suchak’s interview on CNBC-TV18 Q: Where do you stand on JustDial after seeing such high levels, do you recommend profit taking?
A: In terms of Just Dial, we have witnessed a lot of investor interest especially from the offshore clients and this is thanks to the attractive opportunity in this segment, solid business model of the company along with potential growth, which can happen with new launches that the company is working towards on enabling the transactions front. All in all, we believe in the solid business model and we think that the company will continue to deliver. We have seen the proven track record of execution and expect the same in the time to come. Q: What is your target price on this stock and how would you be placed on valuations going forward?
A: We have a target price of Rs 1,250 and in terms of valuations there is no relative valuation or a clear peer for Just Dial. It is a unique business model.
The company has done a commendable job in terms of creating an accurate, substantial and updated data base of 9.5 million listings using an on the ground force. This is even more relevant in a place like India where due to the penetration levels, the online updates wouldn’t work that well.
This itself is a beginning of a virtuous cycle because the data base which is solid attracts more and more users and makes Just Dial the preferred destination for local search services which in turn leads to very healthy lead generation for the small and medium enterprises (SME) and attracts the SME towards a large pool of interested customers.
Interested is again a key word here because the Just Dial user is normally someone who wants to use the service or product. So, the ability or the probability to convert him is far higher than anyone which we get through a cold lead from another source.
Also, the current valuations are based on current earnings estimates on the street wherein including us, I don’t believe we have been able to yet factor in the potential which can come from these new launches in terms of enabling transactions on book a table order food, order groceries, book a cab, which the company is working on and they are either in the concept or in the soft launch stage.
Considering the patronage that Just Dial enjoys from the user and the SME, this can be a game changer in the time to come. Lastly, on the core business, if you talk about the paid listings or campaigns the company currently has around 2,21,000 campaign which is just 2.3 percent of their total listings and even a smaller percent of the total SME population of India.
Now, with the flexibility introduced by the company on the payment plans, I think this percent can significantly improve going forward. So, we would wait for visibility of any of the following fronts to revisit our numbers. Q: Currently, your FY15 EPS estimates stands at about 20.9. Have you factored any upside there which could come in on account of new product launches?
A: Currently, there is no upside factored in FY15 or FY16 from these new product launches. Q: With regards to your conversation with the management, is there a possibility for any new product launches taking place in FY15?
A: Firstly, the management doesn’t give guidance but in terms of our understanding on some soft launches, which have happened on Just Dial, we believe that some of the products will begin in FY15 and we may see some actual delivery by FY16 on this account because already some of the products are being used by the users.