Buy IndiaMART Intermesh Ltd For Target Rs.9,218 - Yes Securities
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Muted performance due to impact of 2nd covid wave
Our view
Overall, the adverse impact of Covid19 wave on MSMEs impacted the performance in the quarter as reflected in muted growth in paid subscribers. It remains a leading player in online B2B classified and we expect the financial performance to improve from Q3FY22 led by improvement in financial condition of SMEs. We expect revenue to grow at CAGR of 19.0% over FY22E‐FY24E with average EBITDA margin of 47.7%. We maintain BUY on the stock with revised target price of Rs 9,218 /share.
Result Highlights
* Reported revenue of Rs 1,824 mn( up 0.4% QoQ, up 11.8% YoY). The less than expected revenue growth is due to less than expected increase in the number of paying customers( flat over last 4 quarters) on account of continued impact of 2nd wave on MSMEs.
* Annualized ARPU grew by 5.6% YoY to Rs 48,400( Q1 ARPU had one off effect), inline with the broad guidance of the company
* Reported EBITDA margin of 45.6% ( down 440 bps YoY, down 320 bps QoQ). The decline in margin was due to higher employee cost which increased by 9.5% QoQ.
* The number of registered buyers increased to 138 mn compared to 131 mn in Q1FY22. Indian supplier storefronts increased to 6.7mn in Q2FY22 from 6.6mn in Q1FY22.
* Total traffic to the portal increased to 284 mn compared to 268 mn in Q1FY22.
* Total live products on the platform increased to 76 mn compared to 74 mn in Q1FY22. The number of paying subscribers increased to 150k compared to 146 k in Q1FY22.
Valuation
The stock trades at stretched PER of 50.1x on FY24E EPS. We expect the addition in paid subscribers to pick up going led by strong value proposition and gradual opening of the economy. We rollover to FY24E estimates and value the stock with DCF based target price of Rs 9,218/share.
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