Just Dial (JUST.NS): Strong 1Q results: Revenue momentum to continue; Expect lower margins in 2Q :Morgan Stanley Research
Quick Comment: Just Dial reported stronger than expected Jun-13 results. At the current rate, Just Dial is on track to meet consensus FY14 growth forecast. We believe Just Dial could continue to report 6-7%qoq revenue growth over the coming quarters.
Revenue growth of 28% yoy in Jun-13: JD reported revenues of Rs1,046m (+28% yoy) in 1Q14. Apr-June quarter had the impact of traders' strike in Mumbai and other parts of Maharashtra, which could have dragged down revenues by 1-2% for the quarter, we estimate.
Strong operating margin improvement: JD reported EBITDA margins of 34.7% (~400bps yoy). As per management, margins can be volatile across quarters. For example, in FY13, Q1 EBITDA margins were ~31%, but FY margins were 28%.
Strong margin improvement was driven by solid 6%qoq revenue growth and 4%qoq lower employee and operating expenses. We believe operating margins could ease as advertising and sales incentive costs normalize over the next two quarters. However, we believe JD could still report at least ~150-200bps margin improvement in FY14.
Valuation: At ~10xFY14e P/S and ~41x FY14e P/E, Just Dial stock could continue to trade in a tight range, we believe. Management has delivered ahead of expectations on all counts, and we believe strong Jun13 quarter performance should support the current stock price. However, margins could be volatile across quarters, and we do not see a material upward revision of our F14e EPS despite the strong June qtr results.
Revenue growth of 28% yoy in Jun-13: JD reported revenues of Rs1,046m (+28% yoy) in 1Q14. Apr-June quarter had the impact of traders' strike in Mumbai and other parts of Maharashtra, which could have dragged down revenues by 1-2% for the quarter, we estimate.
Strong operating margin improvement: JD reported EBITDA margins of 34.7% (~400bps yoy). As per management, margins can be volatile across quarters. For example, in FY13, Q1 EBITDA margins were ~31%, but FY margins were 28%.
Strong margin improvement was driven by solid 6%qoq revenue growth and 4%qoq lower employee and operating expenses. We believe operating margins could ease as advertising and sales incentive costs normalize over the next two quarters. However, we believe JD could still report at least ~150-200bps margin improvement in FY14.
Valuation: At ~10xFY14e P/S and ~41x FY14e P/E, Just Dial stock could continue to trade in a tight range, we believe. Management has delivered ahead of expectations on all counts, and we believe strong Jun13 quarter performance should support the current stock price. However, margins could be volatile across quarters, and we do not see a material upward revision of our F14e EPS despite the strong June qtr results.
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