See negative reaction to Just Dial stock on Q3 results: Nomura

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Just dial reported 3Q results that were below consensus expectations on both revenues and margins. Revenues were below expectations primarily due to lacklustre growth in paid listings and a slight decline in realizations. Search business revenues have decelerated over the last five quarters from 30%-plus levels to 11% y-o-y in 3QFY16.

We view the miss on revenues and margins negatively and plan to publish a detailed note post interaction with management. We expect negative stock reaction to the results. Key focus issues during the conference call on January 28 included management’s commentary on weakness in paid campaign growth and anticipation on rebound and reason for delays in commercial launch and timing of the start of the advertising campaign for the Search Plus business.

3QFY16 revenues were R1.71 billion, up 11% y-o-y (vs. our estimate of R1.76 billion and cons. of R1.82 billion). Paid listings grew by 1.5% q-o-q to 354.9K (vs. our estimate of 5.0% q-o-q), while realisation decreased by 1.1% q-o-q to R19,450 (vs. our forecast of flat realisations at R19,666).

Overall listings increased 1.9% q-o-q to 16.1million. Paid listings grew 13% y-o-y. 3Q reported EBITDA margins of 21.8% decreased 140bp q-o-q, below the consensus estimate of a 320bp q-o-q improvement. EBITDA margins adjusted for ESOP charges were 25.7% (down 170bps q-o-q). Other income was lower at Rs 96 million (vs. Rs 263 million in 3Q), and the effective tax rate was 30.6% (vs. 20.3% in 2Q).

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