ValuePickr Forum

Just Dial Limited

I am sure I am missing something here given the stock has corrected over 20% in a month when its revenue beat FY16-Q4 estimates (albeit at higher costs) and its EBITDA came in-line, so curious to know if JD is loosing steam structurally / strategically and falling behind the curve

  • when compared to new breed of start-ups,
  • failed product launch, and
  • lack of clear strategy / business direction

Earlier in the year I was under impression that as the cheap / crazy money has dried up in 2016, JD will fire-up its engines and gain more ground with the cash it has, as earlier (in 2015) it was everyone from Zomato, Practo, Quikr, who were gaining customer acquisition at JDs cost (or say lack of “ad campaigns” as its management has put).

Keen to hear thoughts from other VP’ers following JD (as in Just Dial Ltd and not Jack Daniels)

There are a few issues here. Too much competition from dedicated verticals is leading to value migration away from their platform (greater category focus brings better content, better presentation, and better service levels). This tends to show up as pressure on pricing, churn and potentially margins for JD. Secondly, its a feet on the street sales driven model while competitors rely increasingly on technology. Thirdly, their SME database and prompt customer response is not as much of an edge in the smartphone world, as it was in a call center world.

Disc. - no position.

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there is already a thread on just dial

I did see one in stock opportunities but its closed.

Looks like they are doing the same now as they have hired more foot soldiers to push deeper into the markets.

I think one key element they bring on table is getting SME onto a digital platform which still is not done by google, agree new start-ups are playing a part but at a national scale JD has an advantage. And JD Omin could take digitization of SMEs to new level if they don’t screw-up like “Search Plus” which they missed by a wide margin. Not to mention all the cash sitting with JD.

PS i was referring to FY16 - Q4 numbers and not FY17 - Q1

Disc - have position in JD and nursing a loss so am keen to dig deep.

thanks Amit - your blog and ppt are very informative.

Management disposal via buy-back was news to me and that is indeed not a good sign as it goes to show that the management team as opportunist without clear and future proof growth plan, but still with current holding they have skin in the game.

Also agree to your point on valuation of FCF and P&L bottom line, but all listed tech companies (Yelp, linkedin, Ebay etc) are valued based on FCF and it is a standard practice.

I am betting on JD Omni as it will make the company a product company and give a predictable revenue profile. Given how market is rewarding Infibeam and its BuildaBazaar. But the biggest factor to consider is the execution and deployment of all the cash.

What do you make of the script now at current levels?

As a 20-something heavy smartphone user (primary customer group for JD?), my review of JD is really really poor; rather to an extent that I avoid visiting the website. JD used to be useful for fetching phone numbers. If you Google something on your phone and press the JD link, it takes you to the JD website, not your search. Compare it to the intuitive search results by other vendors, JD is miles behind. Clearly their customer service flow is broken and has been that way for some years.

I’ve not read in detail about its software product to offer vendors a web platform, but in this age, I don’t see it as a revolutionary offering either. Its search business is a mess, it’s not even in the top 5 search results on Google.

Disclosure: no holdings.

I still believe JD is frightfully expensive. The market does not seem to understand the structural challenges facing the business. Most analysts predict a growth revival in H2 FY17. I think that’s unlikely and things will only get worse from here.

JD has largely been a story stock for the last two years. Despite the core business weakening every quarter, analysts kept hoping for Search Plus to change the fortunes based on mgmt commentary. Now that Search Plus has been a failure, analysts are now talking about JD Omni as a saviour - again based on management commentary. Based on consumer surveys, JD Omni has already failed. JD is now selling Omni for free along with its listing package. The initial users who bought it for 30k+ are pissed that in just a few months its available for free and asking for refunds leading to poor word of mouth. Moreover, a large number of the users who paid for Omni in Q4 have still not been delivered the product. A good way to evaluate Omni’s potential is to try to find even 10 users who are actively using Omni and happy with it. If large number of happy users don’t exist, how can a product succeed?

I think the next cpl of quarters results should make things more clear. Key points to focus on in result and mgmt commentary in concall -

  1. For 20% growth to return in H2, customer advances should start growing strongly now itself. I believe advances trend will worsen (they were flat on YoY basis in Q4 end).
  2. JD Omni ARPU trend - For Omni to be meaningful, ARPU needs to be reasonably high. If most Omni sales are free, this is unlikely to be the case.

Overall, my view is that the company is in a structural decline and will probably start reporting EBIT losses in FY18.

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Agree. Next couple of qtrs are critical.

I see Omni differently, if JD is smart to push the product on the back of GST argument than it has a winner (apart from Tally et el). And I will take it as a good news if the cash is deployed in a meaningful way to cover more market + add new customers (even for free) as it will give them to monetize the e-com platform with all the data / intelligence.

For now I guess its wait and watch.

Do share thoughts/ Inputs on the Just Dial buy back.

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