Target: ₹8,000
CMP: ₹ 4,560.05
IndiaMart posted a decent quarter with revenue of ₹188 crore (+3.1 per cent q-o-q) but surprised negatively on the margins (-372bps q-o-q). Paid supplier addition improved due to lower churn and economic recovery (6k addition vs. our estimate of 5k).
The company is undertaking investments in manpower and talent retention to fuel growth, which has impacted margins in the quarter. The company has been actively executing acquisitions over the past year (₹710 crore), with its largest one being Busy Infotech (an ERP software for on-premises accounting) which is acquired for a cash consideration of ₹500 crore.
We maintain our positive stance, based on (1) higher visibility, given the 25 per cent y-o-y growth in deferred revenue; strong cash collections of ₹620 crore for 9M-FY22, an increase of 40.1 per cent y-o-y; economic recovery leading to better MSME health; healthy cash reserves of ₹2,520 crore, which will be used to create adjacency; and cross-sell opportunity from the Busy Infotech acquisition.
Our target price of Rs 8,000 is based on 57x FY24 P/E (DCF implied), supported by revenue/EPS CAGRs of +21/16 per cent over FY21-24.