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Healthy paid subs growth; weak numbers in Q2 on seasonalit

About the stock: Matrimony.com (Matrimony) is one of the leading providers of online matchmaking services. The company also provides post marriage services.

* Apart from a common website, the company operates ~300 community matrimony sites and 15 regional matrimony sites

* Net debt free and only profitable player among its peers

Q1FY23 Results: Matrimony reported healthy numbers on paid subs.

* Revenues increased 4.9% QoQ aided by 8.7% QoQ growth in paid subs

* Matchmaking EBITDA services margins improved 74 bps QoQ

* Marriage services EBITDA loss widens

What should investors do? Matrimony’s share price has dipped over the past four years (from ~| 905 in September 2017 to ~| 785 levels in August 2022). 

* We maintain HOLD rating on the stock

Target Price and Valuation: We value Matrimony at | 790 i.e. 22x P/E FY24E EPS

Key triggers for future price performance:

* Market leadership in an underpenetrated online matchmaking segment

* Transition to online from offline, healthy subscriber addition, increased penetration in north, introduction of new products and inorganic opportunity key revenue drivers (11% CAGR over FY22-24E)

* Higher conversion rate (paid vs. total profiles)

Alternate Stock Idea: Apart from Matrimony, in our IT coverage we also like Affle.

* Key beneficiary of advertising shift to digital medium and healthy growth in converted users

* BUY with a target price of | 1,295

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