Route Mobile hits 18-month low; stock sheds 25% in the two weeks

Shares of Route Mobile hit an 18-month low of Rs 1,052.60, down 4 percent on the BSE in Thursday’s trade on concerns of weak operational performance. In comparison, the S&P BSE Sensex was up 0.5 percent at 52,104 at 02:10 PM.

In the past two weeks, the stock of other telecom services providers has dipped 25 percent. Since, May 17, the stock has slipped 30 percent after the company reported a weak operational performance for the quarter ended March 2022 (Q4FY22).

The stock traded at its lowest level since December 2021. The stock price of the company has more-than-halved or tanked 56 percent from its 52-week high of Rs 2,388 touched on October 12, 2021.

Route Mobile is a cloud communications platform service provider, catering to enterprises, over-the-top (OTT) players, and mobile network operators (MNO). The company’s portfolio comprises solutions in messaging, voice, email, SMS filtering, analytics, and monetization.

Route Mobile said the contraction in earnings before interest, taxes, depreciation, and amortization (Ebitda) margins from 14.2 percent in Q4FY21 and 13.7 percent in Q3FY22 to 11.1 percent in Q4FY22 is partially attributable to the seasonality of the business, especially of Masivian and certain one-off expenses.

However, Ebitda’s margin expanded from 12.5 percent in FY21 to 12.9 percent in FY22. The management said it is confident of delivering a 150 basis point improvement in Ebitda margin and 40 percent year-on-year growth in revenue in FY23.

However, analysts at Emkay Global Financial Services cut FY23/FY24 estimates by 0.4 percent/ 2.6 percent considering Q4 performance.

The brokerage firm has retained the ‘Buy’ recommendation with a revised target price of Rs 1,630 (earlier Rs 2,150); it lowered the target multiple to 32x from 42x, factoring in moderation in medium-term growth assumptions due to macro uncertainties and potential business disruptions in new-age tech companies, corrections in CPaaS firms’ valuations and dilution in medium-term return ratios with acquisition-led growth.