Just Dial Stocks Slide After Q3 Results, Company Posts Net Profit of Rs 29.7 crore

Mumbai based local search engine Just Dial announced its third quarter results for current financial year. The result was not exciting with just 3.8 % growth in its net profit on sequential basis. Rather, the stock was down by almost 10 % after its announcement of the quarter result.

Just Dial reported a 6.39 % sequential growth in its revenue to Rs 120 crore during Q3FY14 against Rs 113 crore in Q2FY14. The company showed a revenue growth of 6-7 % consistently for the last three quarters since its listing on the bourses. Interestingly, the company's EBITDA decreased by 5.36 % to Rs 33.34 crore in Q3FY14 against Rs 35.23 crore in Q2FY13. The negative growth in its EBITDA was primarily due to the huge increase of 36.70 % in its other expenses. The negative growth was compensated by significant growth of 28.09 % in other income on sequential basis. Despite of de-growth in EBITDA, the company managed to post 3.8 % growth in third quarter on sequential basis. The net profit for Q3FY14 stood at Rs 29.75 crore against Rs 28.66 crore in Q2FY14.

However, Just Dial is clearly facing some serious problems on its margin front despite good EBITDA and net profit margin for the company. The EBITDA margins stood at 27.82 %, down by 346 basis points over second quarter and its net margins stood at 24.82 %, down by 62 basis points over second quarter during current financial year.

Just Dial's other income showed consistent increase from Rs 7.32 crore in Q1FY14 to Rs 11.08 crore in Q3FY14. Its other income consists of interest earned on bank deposits, dividend earned on current investments, profit from sale of current investments, etc. The company is debt free company with investments of Rs 486 crore and cash-in-hand of Rs 59 crore as of March 31, 2013.

Just Dial's business model is unique in nature and the company earns from sale of internet and mobile search related services. The company has been included in the FTSE All Cap index from 23 December 2013. Its inclusion in FTSE prompts heavy buying from investors who indirectly track the index. Further, the company recently launched service called “Just dial search plus” with a fixed price model. These changes in the company’s business took the stock price at its all time high of Rs 1779 during current month.

On valuation front, the company's stock is trading at a PE ratio of 83x of its TTM EPS of Rs 15.44. However, considering its financial track record for last 3 quarters since its listing on bourses, the company showed modest growth in its topline and bottomline. The valuation which Just Dial is commanding today is too valued for the current business growth. One should look at the performance of its newly launched service before taking exposure in this stock. Rather, we will recommend our reader to book profit at current market price and wait for the justifiable valuation to enter in this stock.