Arihant Capital has given Accumulate recommendation for Route Mobile with a target price of Rs. 2465 in its research report issued on Jul 29, 2021
Arihant Capital’s research report on Route Mobile
Route Mobile Limited reported weak set of numbers in Q1FY22 and were below our estimates on all front. Although company showed a decent growth on YoY basis due to lower base, QoQ results were poor. Revenue from operation grew by 21% YoY & 4.2 % QoQ to INR 3775 mn below our estimate of INR 3974 mn. Revenue miss was largely due to business volume impacted in India and Middle East in Q1FY22. Revenue from Indian business declined by 28% YoY and 32% QoQ to INR 939 mn . mainly due to DLT issue faced by enterprises and second wave of covid. Company also had reduction in Banking traffic as the company was alleged of data breech from their servers. Company’s banking customers requested to resume the traffic post third party audit. After conducting third party audit no breach was found and banking traffic is resuming to normalcy. However due to this revenue from high margin banking segment was impacted in April.
However we believe factors such as DLT issue faced by enterprises, high operating cost mainly due to higher employee cost is likely to continue as company plan to hire more and more requisite talent going ahead for the new product launches. Can pit pressure on margin going ahead. We value the stock at a P/E multiple of 62 (x) to its FY23 EPS of INR 39.8 to arrive at a target price of INR 2465. Considering weak Q1FY22 results and margin pressure going ahead we downgrade our rating from Buy to Accumulate on the stock.