JM Financial bullish on Just Dial post Q3 results; retains 'Buy'; check why

 

JM Financial remains bullish on Just Dial following the company's third-quarter financial results for FY26 (Q3FY26). 

 

The brokerage has maintained its 'Buy' rating on the stock, tweaking its revenue estimates by 0.4–0.5 per cent for FY26-28, while raising Ebitda margin assumptions by 37–71 basis points (bps). As a result, JM Financial has upgraded its earnings per share (EPS) estimates for FY26-28 by 0.5–0.9 per cent.

 

However, despite the revision in estimates, the brokerage continues to value Just Dial at just 13x core business EPS plus cash. This leads to a revised target price of ₹1,060, slightly higher than the previous target of ₹1,050.

 

 

"Although our rating remains unchanged due to extremely inexpensive valuations, a meaningful upside hinges on clarity regarding cash distribution. If the company were to distribute 100 per cent of FY25 PAT, as indicated in the 1Q/4QFY25 earnings call, the implied dividend yield at current levels would be an attractive 9 per cent," JM Financial noted in its report.

 

Amidst this, Just Dial shares were seen trading at ₹728.50, up 0.63 per cent at 09:56 AM on Wednesday, January 14.

Just Dial Q3FY26 highlights

The brokerage highlighted that Just Dial’s collections, an important lead indicator for revenue, grew by 8.1 per cent year-on-year (Y-o-Y) in Q3FY26. This marked an improvement over the growth rates of 0.6 per cent and -1.9 per cent Y-o-Y in the first two quarters of FY26, respectively. Net paid campaigns grew by 5.2k Q-o-Q, compared to 4.0k and 6.6k in 1QFY26 and 2QFY26, respectively. However, revenue growth remained modest at 6.4 per cent Y-o-Y (+0.9 per cent Q-o-Q), reaching ₹306 crore.

 

Traffic trends, though, showed weakness with a decline of 3.5 per cent Y-o-Y in Q3FY26, despite increased advertising and promotional (A&P) spends of ₹9.5 crore, up from ₹8.5 crore and ₹9.2 crore in the earlier quarters. This, the brokerage said, has raised concerns about the sustainability of the collection recovery.

 

On the positive side, earnings before interest, taxes, depreciation, and amortisation (Ebitda) rose by 10.0 per cent Y-o-Y to ₹95.2 crore, beating JM Financial’s expectations by around 7.5 per cent. This was primarily due to better-than-expected cost control, leading to an expansion in Ebitda margin by 102bps Y-o-Y to 31.2 per cent.

 

While margins surprised positively, the lack of clarity over the company’s cash distribution policy remains a concern. JM Financial pointed out that cash and investments account for more than 90 per cent of Just Dial’s market capitalisation, and any delay or ambiguity in cash distribution could weigh on stock performance despite the company's inexpensive valuation.

Collections improve, sustainability uncertain

According to the brokerage, Just Dial's revenue growth in Q3FY26 was in line with the trends of the first two quarters of FY26, growing a modest 6.4 per cent Y-o-Y (+0.9 per cent Q-o-Q) to ₹306 crore. Encouragingly, collections growth rebounded to 8.1 per cent Y-o-Y, reversing the decline seen in 2QFY26, where it had dropped by 1.9 per cent Y-o-Y. Net paid campaigns grew by 5.2k Q-o-Q, compared to 6.6k in 2QFY26.

 

However, despite increased A&P spends, which rose to ₹9.5 crore from ₹8.5 crore/₹9.2 crore in 1Q/2QFY26, traffic trends weakened. This, JM Financial said, raises questions over the sustainability of the growth in collections.  Further, the brokerage remains cautious, factoring in mid-single-digit collections and revenue growth in the near to medium term due to the subdued growth observed over recent quarters.

Ebitda beat on cost control

The brokerage further highlighted that Just Dial’s Ebitda margin expanded by 102bps Y-o-Y (+243bps Q-o-Q) to 31.2 per cent, ahead of JM Financial’s estimate of 29.0 per cent. This was driven primarily by a 165bps Y-o-Y reduction in employee costs as a percentage of revenue, reflecting the workforce rationalisation undertaken in earlier quarters. Other expenses also saw a reduction of 17bps Y-o-Y. Consequently, Ebitda increased by 10.0 per cent Y-o-Y (+9.4 per cent Q-o-Q) to ₹95.2 crore, surpassing expectations by 7.5 per cent. 

 

The company also recognised a one-time exceptional charge of ₹21.08 crore towards past service gratuity costs, following amendments to the Social Security labour code effective from November 21, 2025.

 

Looking ahead, JM Financial expects A&P and other operating expenses (as a percentage of revenue) to normalise upwards to support traffic and growth revival, but does not anticipate any material increase in employee costs. Overall, the brokerage expects Ebitda margin to stabilise at around 29–30 per cent. 

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