Route Mobile - Growth Revival: HDFC Securities

HDFC Securities Institutional Equities

Route Mobile Ltd. is set to witness a growth uptick after the completion of the strategic acquisition by Proximus Opal. The growth recovery (~20% in FY25E versus 13% in FY24) is underpinned by a recovery in messaging volume (international long distance and national long distance), a net new firewall deal, WhatsApp/RCS opportunities, and expansion in mature markets.

Proximus Opal acquired an 83.1% stake in Route Mobile, which positions Route+Telesign as the third largest global CPaaS player in terms of volumes. Route is expected to unlock synergies with TeleSign (owned by Proximus), enhance product offerings, and expand reach in mature markets like the US and Europe.

The announcement of a five-year strategic partnership between Proximus and Microsoft showcases the potential for revenue synergies. Route management has guided for revenue growth of 18-22% YoY, Ebitda margin of ~13% and improvement in cash flows.

We estimate a 20% YoY growth in FY25E which assumes ~10% from the firewall deal and ~10% from the base business, which is in line with the global CPaaS industry growth.

Route Mobile has invested ~Rs 3.8 billion in the firewall deal, which has impacted its cash flows in FY24; we expect cash generation to improve gradually.

We maintain our positive view on Route, underpinned by-

1. strong growth guidance;

2. revival in messaging volumes;

3. international expansion; and

4. growth and cost synergies post Proximus/Telesign takeover.

We keep estimates unchanged and assume a revenue/EPS CAGR of 20/21% over FY24-27E.

We maintain our Buy rating with a target price of 2,100, based on 23x Sep-26E EPS. The stock is trading at a P/E of 24/19 times FY25/26E, generating a return on equity of 18%.

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