Mumbai: The stock of search engine firm Just Dial has been creating a lot of buzz over the past one month, having rallied 57 per cent as it readied the launch of its B2B platform. The stock trades at Rs 572.95, up 129 per cent from its March low of Rs 250.55, which was also its all-time low.

A look at the stock’s past performance shows it did witness a stellar run post listing, but then continued to languish till the recent uptrend started.

In a post earnings analysts’ call on August 3, founder VSS Mani announced the company’s plans for a B2B platform, and the stock seems to be riding on hopes that the new venture will be a major success.

“On the B2B front, there is a separate initiative to catalog every product and create a marketplace within Just Dial,” Mani said in August, promising a lot more content enrichment and a separate portal.

UBS recently hosted the Just Dial management for a demo launch of its B2B platform, JD Mart. On Tuesday, UBS came out with a ‘buy’ rating on the stock and raised its price target to Rs 800 from Rs 640 earlier, citing significant value accretion from the B2B venture.

The brokerage believes Just Dial will leverage its existing platform that attracts 140 million quarterly unique users and has 100,000 paid B2B subscribers to upsell JD Mart. The company’s core strength is its large sales force (9,000), which should help monetise JD Mart, it said.

“The company showed strong commitment to the new initiative, earmarking $15 million for JD Mart branding, and indicated that it would hire senior management and a specialised sales team for the same,” UBS said, referring to its interaction with the Just Dial management.

The brokerage said the Just Dial stock trades at 13 times FY22E P/E compared with 60 times for IndiaMART InterMESH, suggesting that the market is ignoring JD Marts potential to become a relevant B2B platform.

“Successful sales strategy execution could result in a significant rerating for JD, in our view. Also, the spread of new vertical search engines in the past few years has decreased competition from Google,” UBS said.

A few others were upbeat too.

“I am still quite positive on the stock, as we had a conservative estimate. Even after the recent runup, the stock valuations are not demanding at all,” said Vivekanand Subbaraman, a research analyst with Ambit Capital.

“We may revisit the estimates as traffic is returning to Just Dial and lockdowns are easing sooner than expected. The B2B product launch was not in our numbers,” he said.

Subbaraman recalled that the company earlier had a ‘one-size fits all’ strategy in terms of internet classifieds, and had no particular focus; it wasn’t very clear whether it ever wanted to be a full-stack internet company (B2B or B2C).

“They were just a much better version of the Yellow pages. We had been of the view that the approach was not tenable. The stock price had been languishing though, and cash flow generation has made the valuations very attractive, he said.

“With the new products like JD Mart and JD Xperts, we hope to see the company’s growth trajectory move into a new orbit,” the analyst said.

However, other analysts felt it was too soon to take a call on the stock, given that there was no clear blueprint on the company’s plans with JD Mart. Also, past stock performance continues to bother many.

Though Just Dial had the first mover advantage in the search engine space in India, it failed to deliver in terms of growth, which reflected in the stock price. The stock was listed in 2013, and since 2014, it has eroded value in four out of six full years. Even after the recent stellar gains, it is up only 4.9 per cent on a year-to-date basis.

In recent times, the stock has seen a spike in volume, with a lot of bulk deals having been done on the counter, which hinted that the stock was looking like a trading opportunity rather than an investment option.

Of late, promoters VSS Mani, Anita Mani, Eshwary Krishnan and Manasi Iyer have also upped their stake in the company. “It has not really rewarded shareholders in the past. Hence, we do not have any coverage on the stock,” said Mahantesh Sabarad, Head of Retail Research at SBI Capital Markets.

As of Wednesday, the stock had 4 ‘strong buy’, 7 ‘buy’, 2 ‘hold’ and 2 ‘sell’ ratings on the publicly available Reuters Eikon database. The mean and median price targets stood at Rs 511 and Rs 483, respectively, which have already been breached.

Not many analysts seem to have revisited their ratings on the stock in recent times.

On the flip side, the company us facing stiff competition from full-stacked B2C players such as

and others like IndiaMART, Udaan and Ninjacart in the B2B space.

The company had the first mover advantage as a search engine, but failed to withstand rising competition from giants such as Google. Many new startups flooded the app-based digital business space, as the app culture with easy reach of smartphones caught on.

“There are expectations that B2B transactions will pick up digitally, which has driven interest in IndiaMART InterMESH. With Just Dial entering the space, the stock is seeing some traction as well,” said Abhimanyu Sofat, Head of Research at IIFL Securities, explaining the recent pickup in the stock price.

Sofat said the company is shifting from being a search company to a B2B marketplace, as it has strong contacts and a rich database to help ramp up operations. He said Just Dial had huge cash in its books and also huge balances as advances from clients, which can help it scale up.

“That said, Google is also listing small businesses, thereby threatening some form of competition in the B2C space. Thus, it remains to be seen how JD Mart fares in this backdrop,” he said, pointing to the lacklustre stock price performance since listing.

It said Google was a dominant player, and too big one to compete with. “It is difficult to say if JD Mart can scale up and perform well. Consequently, it is difficult to take a call on the stock at this point of time,” said Sofat.

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