Analyst Corner: Route Mobile: Initiate with ‘hold’ and TP of Rs 1,280

Route Mobile (Route) is one of the largest players in the Application to Person (A2P) message business and a formidable emerging player in the high-growth (33% CAGR over FY19-24E) CPaaS segment. Despite its global scale, the company’s cloud-based architecture entails low capital requirement, driving high return ratios; this has spurred cash flow generation – a trend we expect to sustain.

We estimate 30/44% revenue/EPS CAGR over FY20-23 as consolidation favours big players and its ability to mine large accounts. However, at 41x FY22E P/E, the market is already factoring in strong growth; hence, initiate with ‘hold’ and target price (TP) of Rs 1,280. Technological obsolescence and inefficient capital allocation are key risks.