Anand Rathi's research report on IndiaMart InterMesh
After adding ~13,000 (net) paying suppliers in Q4 FY22, IndiaMart has seen strong traction in subscriber additions and guided to adding ~8,000-9,000 paying suppliers a quarter in FY23 (earlier, ~5,000-6,000). The churn rate has stabilised at pre-Covid levels. Like Q4 FY22, the next quarter (Q1 FY23) will see high costs and margins will be impacted, then gradually improve. With the recent fall in the stock price, we find the valuation attractive and revisit the stock with a Buy rating and a TP of Rs5,500 (based on DCF basis, assuming 12% WACC & 6% terminal growth rate, implied PE of 45x FY24 EPS). We maintain our positive stance based on greater assurance, given growth in deferred revenue (reported 25% y/y in FY22); strong cash collections (reported 32% y/y growth in FY22); gradual economic recovery leading to better business conditions and healthy, ~Rs20bn, cash reserves.
Outlook
We revisit the stock with a Buy rating and a target of Rs5,500.
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