Goldman Sachs has reiterated sell rating on Just Dial with a reduced target of Rs 500 per share. The brokerage firm sees a 37 percent potential downside after the stock rallied 10 percent in last month. Goldman Sachs warns of a weak earnings and significant consensus downgrades in 2016 led by inadequate Search Plus (SP)and JD Omni traction.
This follows Credit Suisse‘s downgrade of the stock to neutral from outperform with a reduced target price of Rs Rs 950 from Rs 1000 (April, 2016). Credit Suisse said that maintaining pace of paid listing growth, particularly outside the top-ten cities, and competition from vertical players are key challenges for Just Dial.
Goldman Sachs estimates Just Dial’s two-year revenue and earnings per share (EPS) CAGR of 16 percent and 5 percent respectively. It adds that the company will find it difficult to deliver 6 percent compounded quarterly growth rate (CQGR) in FY17 and to add 20000 paid campaigns every quarter to achieve its 20 percent revenue growth guidance for FY17.
“Market’s positive view of JD Omni sign ups may be short lived. Even if we assume over 20,000 JD Omni sign ups by FY17 and value the product separately at the same valuation of QuickHeal, Omni’s implied value would be USD 109 million or 32 percent below current price,” it says in a report.
The stock fell over 1 percent intraday on Monday. At 10:44 hrs Just Dial was quoting at Rs 783.50, down Rs 6.00, or 0.76 percent on the BSE.
Posted by Nasrin Sultana
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