30 October 2024
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Company Name INDIAMART
Current Market Price Rs 2,795
Calendar Year Return 29.11%
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IndiaMART stands as India’s premier online business-to-business (B2B) marketplace.
Investing Rationale
Market Leader: The company has a 60 per cent market share in the domestic online B2B sector, catering to the small and medium enterprises (SMEs), large enterprises, as well as individuals.
New Subscribers: It has a growing and engaged subscriber pool (210,000) and steady upgrades to higher packages. We anticipate a positive trend in net additions. The management is also exploring strategies, such as recalibrating client acquisition strategy, while simultaenously reducing exposure to non-performing cities. However, we believe that progress on this front would be more visible only after a few quarters.
A continual, gradual enhancement in gold and/or platinum average revenue per user (ARPU) is expected to drive pricing growth and the outlook for collections. Lead indicator data also remains optimistic in this regard.
Unique Business: During Q2 this year, the company observed sequential growth in traffic, business enquiries delivered and unique business enquiries at 13 per cent, 11 per cent, and 9 per cent, respectively, breaking a trend of plateauing over the past few quarters and highlighting heightened platform relevance. The 27 per cent yearly growth in collections, along with a guidance of 20-22 per cent growth also bodes well for the company.
Revenue: We expect a revenue growth of 22 per cent, operating profit margin to grow to 27.9 per cent and earnings per share growth of 37 per cent FY24.
While management has stated reworking strategies to reduce churn and improve net subscriber addition, a miss on subscriber uplift along with weaker-than-expected growth in accounting business will affect our estimates.
Though subscriber addition was weak, sustained ARPU improvement, and traffic growth reiterates our positive stance. We maintain a buy with target price of Rs 3,500.
Recommended by: Amit Khurana, Head Equity, Dolat Capital
