JustDial Profit Growth SlowsDown

Justdial SEarch Growth and ProfitsJustDial’s revenues increased 38.4% YoY in FY13 to Rs3.6bn (inline with our expectations). Search-related revenues increased 37.9% YoY owing to a 20.8% YoY growth in advertisement campaigns and a 14.2% YoY growth in realizations. Profit increased 26.7% YoY in FY13, 7% below consensus estimates, owing to other income of Rs135mn and exceptional cost of share issue expenses of Rs15mn.

Ad campaigns increased 20.8% YoY to 206,500 (vs 171,000 in FY12 and our expectation of 207,500). Realisations improved 14.2% YoY (vs 15.5% YoY expected by us) to Rs17,320.

JustDial received 364mn search requests in FY13 (up 43% YoY). Internet (182.6mn, up 47% YoY) and mobile-based (41.9mn, up 208% YoY) searches were the largest contributors. Voice-based searches increased 20% YoY to 139mn whilst SMS searches increased 47% YoY to 0.9mn.

Although the company enjoys unaided brand recall in the voice search business, the same may not be necessarily true for its website. Just Dial continues to sell its packages largely on the back of its voice offerings. Furthermore, the company’s large cash balance may result in further declines in shareholder returns. Whilst the company is likely to leverage its strong relationships with SMEs to improve its ad campaign penetration, earnings may not increase as currently anticipated given its average presence over the internet.

For an investors standpoint of view, Justdial faces high growth expectations (evidenced by the high valuation multiples) in FY14/ FY15 is a big challenge.