Homegrown search engine Justdial Ltd. has defied analysts' estimates to post a recovery in 2017.
A sell rating of nearly 60 percent by analysts polled by Bloomberg has failed to dent the demand for the company's stock. It has risen almost 62 percent in the first two months of the year, compared to a decline of nearly 60 percent in 2016.
That makes Justdial the best year-to-date gainer in the NSE Nifty IT index, a complete turnaround from being the worst performer in 2016.
The Mumbai-based firm has exceeded its consensus 12-month target price by 26 percent, the widest margin on record, according to Bloomberg data.
So, why are investors betting on Justdial?
According to a report by Deutsche Bank, the company has shown “fairly visible” signs of a turnaround in revenue growth in the December quarter. A healthy growth in listings, paid campaigns and monetisation of listings suggest that revenue growth in the search business is likely to improve in the financial year 2017-18, the report said.
“We expect the company to deliver earnings compound annual growth rate (CAGR) of 18 percent over FY17-19e,” Aniruddha Bhosale, research analyst at Deutsche Bank, wrote in a note.
Deutsche Bank has a 12-month target price of Rs 600 on Justdial, which is trading at 548.
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