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‘Charting’ a path to glory

We initiate coverage on C.E Info Systems (MapmyIndia/MMI), a premier and indigenous location platform provider, with an ACCUMULATE rating and TP of Rs1,625. MMI’s near-monopoly in India is driven by its accurate mapping technique; our conversations with stakeholders have highlighted that accuracy is critical when choosing a mapping partner. MMI’s comprehensive solutions, flexible pricing policy, asset-light model coupled with favorable macro factors have helped it stand out in a new-age tech space. Our conviction is further bolstered by its robust financials i.e. best in class operating margins (40%+), debt-free status, healthy balance sheet, and high return ratios, while 3.3x growth in new order bookings during FY19-21 drives strong revenue growth visibility, leading us to believe in MMI’s long term prospects.

Unique model built on a solid foundation: MapmyIndia is a unique, proprietary digital asset-driven and asset-light company based on a strong foundation of comprehensive and accurate map data, which gives MMI a competitive edge. MMI’s market leadership stems from the depth and breadth of its offerings and we believe, the company is set to reap the benefits of its superior products, an early entry in the high entry barrier market, and a targeted approach on B2B and B2B2C markets; evidenced by 3.3x growth in new orders

Emergent demand in automotive and consumer segment to aid revenue growth for MMI: Demand for location intelligence is growing driven by its ability to deliver operational and performance benefits; which we believe could trickle down to 38.5% CAGR revenue growth for MMI during FY21-24E. MMI is expected to benefit from increasing ADAS adoption in India led by its 80% market share in car navigation, rising demand for shared mobility, and expansion into navigation solutions for two-wheelers. Furthermore, the rising dependence of non-pedestrian sectors (BFSI, Ecommerce, agriculture, drones, and gaming) on location intelligence is expected to provide another leg of growth for MMI. The management highlighted that the company is gearing for tapping this mounting demand by adding frontend

Riding the ‘Atmanirbhar’ wave: GOI liberalized the geospatial sector making data easily accessible to domestic players while restricting the ability of foreign entities to create accurate maps above a certain threshold; making MMI a key beneficiary owing to its monopolistic stature in the market. MMI’s partnerships with government entities such as ISRO, Ministry of Road Transport & Highways, and Ministry of Civil Aviation could enable MMI to play an important role in digital India initiatives, driving growth for MMI.

Valuation & Risks: Global peers – Trimble, mainly to geospatial sector, operates at 25-27% EBIDTA margin. The stock trades at 37x FY21 EPS; Zenrin with 12-15% EBIDTA margins and limited growth visibility, trades at 40PE (5Yavg). We firmly believe that MMI should trade at a premium to its global peers owing to its superior 40%+ EBIDTA margins, robust revenue growth visibility and improving ROIC. We assign a 55x PE multiple to FY24E EPS (35% premium to Zenrin), thus arriving at a target of Rs1,625 (PEG<1.5); our bullcase TP is Rs1,800. Studies suggests that businesses in undiscovered sectors tend to trade at high valuations as investors draw comfort in growth/ROE and we see a similar case play out in MMI; partially also visible in its recent outperformance. Risks to the thesis: Muted auto demand, concentration risk.

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