Route Mobile Stock Alert: BUY Issued with Rs 1000 Target! Strong Q2 Operations Shine Despite One-Off Loss!

Emkay Global Financial Services has maintained a BUY recommendation for Route Mobile shares, setting an unchanged price target of Rs 1,000. The brokerage report highlights a robust operating performance in the second quarter, with revenue increasing by 6.5% sequentially to Rs 11.2 billion. This growth was primarily fueled by the international business, expansion of the International Long Distance Operator (ILDO) segment, and domestic volume increases, despite facing lower realizations. The company also saw an improvement in its operational profitability, with EBITDAM expanding by 80 basis points quarter-on-quarter, largely due to a 70 basis points increase in gross margin.

Despite the positive operational trends, Route Mobile reported a net loss of Rs 212 million for Q2. This was attributed to a significant one-off write-off of Rs 1.36 billion in advances made to a Mobile Network Operator (MNO) and an SMS aggregator.

The company's strategy is centered on prioritizing profitable growth over sheer volume, focusing on optimizing its customer mix and scaling its telco business which offers higher margins. They are also onboarding higher-margin accounts to sustain and potentially increase profitability.

Management anticipates that the growth momentum will carry into the second half of the fiscal year, bolstered by new product sales, securing large enterprise deals, and seasonal factors.

Emkay Global has adjusted its earnings per share (EPS) forecasts, tweaking FY27-28E EPS by approximately 1% while raising FY26E adjusted EPS by about 19% based on the Q2 performance.

Impact This report provides a positive outlook on Route Mobile's operational capabilities and future growth prospects, despite the Q2 net loss caused by a one-off event. The BUY rating and price target suggest potential upside for the stock, encouraging investors to consider it. The focus on profitable growth and margin improvement is a key takeaway for long-term investors. The valuation is deemed reasonable by Emkay. Rating: 8/10

Difficult Terms: QoQ: Quarter-over-Quarter. This term compares a company's financial results from one quarter to the immediately preceding quarter. ILDO: International Long Distance Operator. A telecommunications company that provides services for international voice calls. EBITDAM: Earnings Before Interest, Taxes, Depreciation, Amortization, and Management fees. A measure of a company's operational profitability before accounting for certain non-operating expenses and capital charges. MNO: Mobile Network Operator. A company that provides wireless communication services to mobile phone users. SMS aggregator: An intermediary service that allows businesses to send SMS messages in bulk to mobile subscribers, often through direct connections with MNOs. EPS: Earnings Per Share. A company's net profit divided by the number of its outstanding common shares, indicating profitability on a per-share basis. Market Cap: Market Capitalization. The total market value of a company's outstanding shares of stock. Rerating: A significant upward adjustment in the valuation multiples (like P/E ratio) of a stock, often driven by improved financial performance, positive market sentiment, or growth prospects.