Route Mobile shares surge 9% in a weak market; here’s why

Shares of Route Mobile rose nearly 9% today after HDFC Securities initiated coverage on the shares of the communications platform. HDFC Securities gave a buy call to the Route Mobile stock with a target price of Rs 1,700. Stock of Route Mobile touched an intraday high of Rs 1267.75, rising 8.87% against the previous close of Rs 1164.45 on BSE. Route Mobile stock has gained after two days of consecutive fall. Earlier, the stock opened higher at Rs 1170.75.

In terms of technicals, the relative strength index (RSI) of the firm stands at 41.5, signaling the stock is neither oversold or overbought. The stock has a one-year beta of 1.2, indicating high volatility during the period. Route Mobile shares are trading higher than 5 day and 20 day moving averages but lower than 50 day, 100 day and 200 day moving averages.

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The shares have lost 19.22% in one year and fallen 0.69% since the beginning of this year. Total 0.31 lakh shares of the firm changed hands amounting to a turnover of Rs 3.78 crore on BSE.

Market cap of the firm rose to Rs 7,870.95 crore on BSE.

HDFC Securities said Route Mobile’s growth will be supported by (1) continued growth in messaging volume; (2) global expansion with several MNO tie-ups (A2P and firewall); (3) traction in new growth areas like OTT and RCS; and (4) up-selling and client mining. Over FY22-25E, we project revenue/EBITDA/EPS CAGRs of plus 36/43/29%. We initiate coverage on Route  Mobile with a BUY rating and Target price of Rs 1,700, valuing it at 25 times Dec-24E EPS, supported by its top quartile growth profile, RoE of 20%, strong cash generation, and net cash of Rs 10.4bn (14% of market cap).

In the December quarter, Route Mobile reported a stellar set of earnings.

Route Mobile's consolidated net profit rose 84.40 per cent to Rs 85.36 crore in Q3. Revenues from operations zoomed 75 per cent to Rs 985.72 crore in the December 2022 quarter, compared to the year ago period.

Sequentially, net profit climbed 17.53 per cent while net sales rose 16.54 per cent.

A cloud communications platform service provider, Route Mobile's clientele includes enterprises, over-the-top (OTT) players, and mobile network operators. Its portfolio includes solutions in messaging, voice, email, SMS filtering, analytics, and monetisation, with client base across segments such as social media companies, banks, and financial institutions, e-commerce entities, and travel aggregators.

Meanwhile, Sensex was trading 321 points lower at 59,178 and Nifty lost 85 points to 17,563 at 11:09 am today. 

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