A bullish outlook from brokerage firm Ventura has put the spotlight on Just Dial Ltd, an internet technology company backed by Reliance Retail. Ventura projects an impressive 195% upside potential for the stock, targeting a price of Rs 2,920 per share within the next 24 months.
Cash-Rich Comfort
Just Dial holds a significant cash pile of Rs 4,625 crore, accounting for 54% of its current market cap of Rs 8,433.87 crore. This robust financial position provides a safety cushion, ensuring operational stability and the ability to invest in growth initiatives.
About Just Dial
Just Dial operates in the internet technology space, offering local search services via its website, mobile app, and phone services. Reliance Retail acquired a 66.95% controlling stake in the company for Rs 3,497 crore in July 2021, strengthening its foothold in the tech and search services sector.
Current Market Performance
As of Friday, December 20, Just Dial’s shares traded at Rs 992.85 on the NSE, marking a 1.72% decline during the session. The stock’s 52-week range stands between Rs 764.15 and Rs 1,394.95, reflecting significant volatility over the past year. During the trading session, the stock hit an intraday high of Rs 1,034.10 and a low of Rs 990.10.
Growth Drivers and Revenue Projections
Ventura’s optimism stems from Just Dial’s potential to expand in Tier-II and Tier-III cities, where the platform’s low penetration and competitive intensity create opportunities for growth.
The report highlights these key growth projections:
- Revenue CAGR: Expected to grow at 16.2%, reaching Rs 1,635 crore by FY27E.
- Listings Vertical: Predicted to grow at a 12.3% CAGR, contributing Rs 1,459 crore.
- Transactions Vertical: Projected to see robust 44.9% CAGR growth, reaching Rs 176 crore.
Profitability and Margins
The brokerage also anticipates significant profitability growth, driven by increasing automation and operating leverage:
- Gross Profit CAGR: 35.7% to Rs 808 crore by FY27E.
- EBITDA CAGR: 42.8% to Rs 631 crore by FY27E.
- Net Earnings CAGR: 24.8% to Rs 705 crore by FY27E.
Margins are expected to improve dramatically:
- EBITDA Margin: Expanding to 38.6% (+1,783 basis points).
- Net Margin: Growing to 43.1% (+831 basis points).
Return ratios are also set to rise, with RoE reaching 12.4% and RoCE climbing to 7.4%.
Risks and Challenges
While Ventura is optimistic, it notes potential risks to its projections:
- Revenue Growth Risks: Slower-than-expected growth in the listings vertical due to competition.
- JD Xperts Performance: Lower-than-anticipated traction could impact overall performance.
Ventura’s price target of Rs 2,920 per share highlights the potential for a transformational journey for Just Dial over the next two years. With its strong cash position, strategic focus on untapped markets, and promising profitability outlook, Just Dial may present a lucrative opportunity for investors seeking growth in the internet technology space. However, competition and execution risks should remain on investors’ radars.
