Just Dial zooms 10%; Goldman upgrades to neutral but cuts target

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26 Aug, 2025 12:21

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Shares of Just Dial rallied 10 percent intraday Thursday. Brokerage Goldman Sachs upgraded the stock to neutral from sell as it sees limited downside to the stock price but slashed 12-month target price to Rs 490 from 640 earlier. It also cut FY16-FY18 EPS by 2 percent to 15 percent as it expects margin to remain subdued in medium term.

The brokerage says since it downgraded stock to sell on December 2 (2015), Just Dial has declined by 52 percent against Sensex down 11 percent. Hence, it now sees limited downside to the stock price as it believes that concerns around slowing growth and execution are largely priced in.

With USD 140 million of cash (30 percent of market cap), Goldman sees valuation support for the stock.

Further, it thinks execution concerns would likely be mitigated only after a few quarters of delivery, especially amid rising competition from global/ local internet majors focusing on hyperlocal services.

Goldman Sachs says its earlier downgrade was predicated on execution risks in Search Plus (SP) and deceleration in core search revenue growth, coupled with higher expenses (such as sales hiring, marketing expenses) posing risks to EPS. Since then, revenues have slowed to 11 percent YoY and margins have compressed to 22 percent while SP promotions remain elusive.

The brokerage now believes most of the risks are priced in although street estimates are yet to factor it in. Moreover, management has acknowledged that the shift in focus to Search Plus impacted their core business and it is now taking measures to ramp up the sales force.

Goldman believes this could take few quarters and expect core search revenue to grow at 14 percent CAGR in FY16E-FY18 (against 31 percent in FY12-15).

Additionally, the search services provider is set to buyback of 10.6 lakh equity shares and this buyback offer will begin from February 25.

At 13:04 hours IST, the scrip of Just Dial was quoting at Rs 558.15, up Rs 32.20, or 6.12 percent amid high volumes on the BSE.