These Analysts Don’t Think Google Will Make Just Dial Irrelevant

What do you do to look up for a business? You google it.For Just Dial Ltd., a business listings firm, retaining users has been tough. The company, which calls itself “India’s local search engine” and provides services over the phone and on the internet, lost more than two-thirds of its market value in the past five years as users, armed with smartphones, started googling for everything. Shares of the firm tumbled nearly 47 percent since their last peak in July. Yet, analysts from UBS and Nomura remain optimistic, and the stock jumped nearly 14 percent in the last month..Fleet-On-The-Street OpportunityOpportunities exist for Just Dial to help bring small businesses online, which is its strength, according to a UBS report. “The company has now started focusing on marketing, mindshare gains and curated content, which should help revive growth,” the brokerage said.Nomura said a wide scope exists to expand coverage at the mid- to low-end of the pyramid and in tier-II or -III cities, areas that provide the company with “a decent runway for growth”.To compete with other search engines, Just Dial said it has a “fleet on the street” of nearly 3,800 employees—an on-field sales team. The count has grown 14 percent year-on-year over. Just Dial’s Founder and Chief Executive Officer VSS Mani said in an earnings call for the quarter ended September that the number could go up to 5,000 soon, depending on its productivity.This fleet gives Just Dial an edge over the competition, according to Chief Financial Officer Abhishek Bansal. Several small and medium-sized businesses that advertise on Just Dial don’t opt for other platforms, he told BloombergQuint, adding that’s because the fleet does the “hand-holding and groundwork” for them. This makes it easier for small and medium enterprises to run a listing and marketing campaign on the Just Dial website, Bansal said.UBS said this helps the listings company target non-frequent and niche searches as the number of vertical or segment-specific search engines declines.“Just Dial helps SMEs post listings on its platform and charges them on the basis of search keywords and area code,” the UBS report said. It’s a low-cost platform compared to Google and SMEs listed on it can still be discovered on Google searches, the report said, adding a typical hyperlocal search on Google in India would likely bring up Just Dial among the top three links and then guide users to one of its listings.Revenue From SMEsJust Dial’s revenue growth fell to a seven-quarter low of 9.8 percent in the three months through September. That, according to brokerages, stems from reduced business, specifically from tier-II and III cities, amid an economic slowdown.The company’s unearned revenues—amount received in advance in exchange for services—for the quarter ended September grew 1.5 percent year-on-year and declined 4.7 percent sequentially.Kotak Institutional Equities said the ticket sizes in these cities and towns are smaller and that has led to “deterioration in pricing power”, adding pressure on revenue..Just Dial managed to increase its operating margin by cutting expenses, including advertising spends, according to Nomura..Online VisitorsThe company said its portal had around 16.1 crore unique visitors in the quarter ended September—80 percent of which were smartphone users, followed by 14 percent web searches and the rest were phone inquiries. Just Dial, according to UBS, has been able to monetise its traffic and its improved quality of curated content will add value to the platform..B2B Potential.Just Dial generates nearly a fifth of its revenue from businesses, with small and mid-sized enterprises paying a subscription fee for website listings. These businesses include everyone from retailers and wholesales to suppliers of parts. Just Dial, however, only lists details about the business and not the products.ICICI Securities said the company’s medium-term focus is to scale up in this segment through improved pricing in India’s 11 largest cities and acquire volumes in others. For this, the company needs to fix two missing pieces—B2B product listings and request for quotation facility—the brokerage said.Bansal said the product listing feature should be available in a few weeks. The “request for quotation” facility is now live on its mobile application. If someone, for instance, is looking for a coffee machine, the facility would get them through to a dealer and they can then get detailed information, he explained.The segment provides a huge growth opportunity. The market leader, IndiaMart InterMesh Ltd., is already growing at an annualised rate of 25 percent. Just Dial’s B2B listings stand at 120,000—not far behind IndiaMart’s 140,000, according to UBS. But Just Dial has, on average, 81 million monthly visitors compared with IndiaMart’s 49 million as it solely focuses on the B2B market.The market is “underestimating Just Dial’s positioning and ability to monetise traffic through SMEs”, UBS said. “We also think market is not pricing in any success for Just Dial’s B2B product-listing efforts.”ValuationsJust Dial trades at 15 times its earnings, according to Bloomberg. That’s nearly a 60 percent discount to its five-year average. As many as eight analysts have a ‘Buy’ rating on the stock, with nine recommending ‘Sell’ and one suggesting ‘Hold’. The average 12-month target price estimate of Rs 676 per share indicates an upside of 23 percent..How To Sign Up For BloombergQuint Story Notifications

These Analysts Don’t Think Google Will Make Just Dial Irrelevant

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