Route Mobile shares jump over 13% after Q3 results. What should investors do?

Shares of cloud communication platform provider Route Mobile rallied 13.4% to Rs 1,295 in Tuesday's intra-day session after the company reported an 84.4% year-on-year (YoY) rise in its December quarter net profit at Rs 85.36 crore. The company had reported a net profit of Rs 55.09 crore in the same quarter of the previous fiscal year.

The company's consolidated revenue from operation for Q3FY23 came in at about Rs 985.72 crore, up 75.16% YoY, whereas total expenses stood at Rs 890.34 crore, recording an increase of 73.75% YoY.

Its consolidated profit before tax stood at Rs 103.13 crore in Q3 FY23, registering a growth of 87.20% from Rs 55.09 crore recorded in the corresponding quarter previous year.

Route Mobile's EBITDA improved to Rs 128.3 crore in Q3 FY23, recording a growth of 66.19% YoY and 17.28% QoQ. EBITDA margin de-grew to 13% in Q3 FY23 as against 13.7% posted in Q3 FY22.

Meanwhile, the company said that the board of directors in its meeting to be held on Thursday, 26 January 2023 will consider a second interim dividend, if any, for the financial year 2022-23.

At 12.14 pm, the scrip was trading 9.9% higher at Rs 1,255. However, in the last year, the stock has fallen over 22%.

"While the recent trend in cash conversion has not been very encouraging, we retain faith in the management commentary on cash conversion assuming these were near-term hiccups. We maintain a buy rating with a revised 10-Yr DCF

(WACC of 13% and Tg of 5%) based Dec '23 TP of Rs 1,800 (unchanged)," brokerage firm JM Financial said.

Nuvama Institutional Equities said, "Route’s overall performance has been impressive, given the backdrop of cautious spending from enterprises amid macro headwinds. Route continues to gain market share and benefit from its global presence. We have a buy rating with a TP of Rs 1,590 based on a P/E of 25x Q3FY25E."

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