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Near-term guidance enabling sustained upmove

CarTrade has seen a strong uptick since posting a reputable 2QFY25 result with the stock up 40%+ since result day. While increasing understanding of the company’s business models and their growth drivers along with the operating leverage story justifies the uptick, it has caught further strength with the company twice sharing guidance on 3QFY25 – 30% YoY growth in Consumer group and 25-30% PAT growth sequentially. While PAT growth guidance was in line with JMFe, 30% growth in New Auto considering the relatively muted auto sales environment was a positive surprise. We expect these to drive sharp upgrades in consensus estimates. Furthermore, considering rising credibility of robust growth along with margin expansion, we upgrade multiples for New Auto and OLX segment to 30x FY27E EV/EBITDA. Consequently, we reiterate our ‘BUY’ rating with Mar’26 TP of INR 1,655.

* New Auto revenue increased marginally: Considering the 30% YoY revenue growth guidance for 3QFY25, we raise FY25 revenue by 1.2% with operating leverage enabling 3.6% jump in reported EBITDA. Furthermore, traffic data (Ex 1) suggests that Carwale has incrementally gained market share and has taken a lead over CarDekho to become the dominant new auto portal in the country. CarDekho also has Zigwheels, 3rd largest new auto portal by traffic, and hence remains larger in terms of revenue. This market share shift is even more evident when we compare Bikewale (3x larger) with BikeDekho (Ex 2).

* OLX growth lowered as initiatives will take longer to show results: OLX CEO, Amit Kumar, is leaving the company and OLX’s Auto and Non-Auto Heads are expected to report directly to Mr. Vinay Sanghi going ahead. With management realignment happening simultaneously as CarTrade looks to cautiously incorporate strategic initiatives, we believe the results could take a bit longer to show up in numbers. Hence, we reduce OLX revenue by 2.1% in FY25 with EBITDA margins also lowered by 150bps.

* Multiple opportunities to plug revenue leakage at OLX: Classifieds platforms across geographies have always struggled to monetise their traffic and user base with OLX India being no exception. This is driven by issues such as 1) consolidated user base restricting price hikes, 2) buyers and sellers establishing direct connect to bypass the platform, 3) inability to implement differential pricing by geographies and ticket size, and 4) availability of multiple platforms willing to undercut on pricing. Interestingly, we understand that the company has already figured out a few leaks and is gradually working on plugging them, which would drive topline growth without any major incremental investments.

* Multiple upgrade for New Auto and OLX segment, TP raised to INR 1,655: We have reiterated previously that CarTrade is a strong re-rating story as more investor conviction gets established with sustained number delivery. Hence, we raise FY27E EV/EBITDA multiple for New Auto as well as OLX segment to 30x considering high-teens growth expectations for a sustained period and steady state EBITDA margins in 45-50% range. We value CarTrade using SoTP-based valuation on FY27E EV/EBITDA multiple for the 3 segments resulting in Mar’26 TP of INR 1,655, implying 14% upside.

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