Motilal Oswal's research report on IndiaMART
IndiaMART delivered strong operational performance during 3QFY21, led by robust increase in paid suppliers (at 7k v/s their target range of ~5k). Collections were up 9% sequentially but flat on a YoY basis. n Margin showed great resilience, with the company reporting the highest ever EBIT margin of 48.4% (v/s our estimate of 39.8%) on lower variable pay and stable employee count. n Leading indicators such as traffic and business inquiries are up 35% and 38% YoY, offering confidence on the sustenance of the current momentum. n While we concur that margin at current levels are not sustainable, the company will see a structural shift in operations from pre-COVID levels. Half of the savings, led by cost optimization, would continue to flow through on: 1] permanent optimization in G&A (reduction in offices to 40 from 80), 2] sales through channel partners are making cost more variable (would lead to reduction in total employees), 3] movement of BPO to cloud telephony system (would lead to 10% savings per seat), and 4] reduction in travel expenses by shifting some of the meetings to video conferencing. For 9MFY21, revenue/EBIT/PAT grew by 4.6%/128%/178%.
Outlook
We arrived at our DCF-based target price of INR9,000 per share assuming 11% WACC and 5% terminal growth rate. Our TP implies an upside of 22%. Reiterate Buy.
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