Shares of classified search company Just Dial have surged about 84 percent in just the last 1 month, with analysts saying it has legs to go further.
The bull run in the stock stems from the shift to e-commerce brought about by the COVID-19 pandemic, as well as Just Dial’s positioning, including its recent efforts to foray into the business-to-business (B2B) market.
Just Dial stock has more than doubled investor wealth (up 132 percent) this fiscal, from Rs 293 to Rs 682 now, even as UBS recently upgraded its price target on the stock to Rs 800.
In a report, the brokerage said Just Dial’s recent B2B platform launch JD Mart could give it a leg-up. The core search engine business attracts 14 crore users in a quarter, and has about 1,00,000 paid subscribers. This could help give a kickstart to the B2B business and help it scale up to compete with B2B commerce market leader IndiaMart.
"JD's core strength is its large sales force (9,000), which should help monetize JD Mart. The company showed a strong commitment to the new initiative, earmarking $15 million for JD Mart branding and indicating it will hire senior management and a specialised sales team," the brokerage said.
It expects JD Mart to become a competing second player with a 25 percent market share in the next three years and contribute 19-27 percent of revenues in FY23-25E.
“While IndiaMART is the leader with 150,000 paid subscribers and US$90m in revenue in the previous fiscal year, this is a fraction of the number of MSMEs in India. Given the room for growth, we think two or more B2B platforms can co-exist,” UBS stated.
The brokerage also noted that JD trades at 13x FY22E PE compared to 60x for IndiaMART, suggesting the market is ignoring JD Mart's potential to become a relevant B2B platform. If Just Dial is able to successfully drive its sales strategy execution, it could result in a significant rerating for the stock, UBS said.
IndiaMart shares have risen 158 percent this fiscal though they have subdued (down 5 percent) over the last 1 month.
For the April-June quarter (Q1FY21), Just Dial reported a 32.4 percent year on year (YoY) decline in its total operating revenue at Rs 162 crore on account of COVID-19 lockdown. However, net profit grew 45.5 percent at Rs 83 crore, due to higher other income.
First Published: Oct 28, 2020 1:24 PM IST
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