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Weathering familiar headwinds Premium cohorts remain resilient; silver churn status quo

* IndiaMART (INMART) reported a 1QFY27 revenue growth of 11% YoY vs. our estimate of 9.6% YoY growth. Deferred revenue rose 16% YoY to INR20b. EBITDA margin expanded ~260bp QoQ to 35.3%, above our estimate of 33%. Adj. PAT was INR1,722m, up 12% YoY, above our estimate of INR1,179m due to higher-than-expected other income.

* For 1QFY27, revenue/EBITDA/adj. PAT grew 11.4%/10%/12.4% YoY. We expect revenue/EBITDA/adj. PAT to grow 10.3%/11.0%/44% YoY in 2QFY27 (driven by a favorable PAT base from lower other income in 2QFY26). We reiterate our BUY rating on the stock, citing undemanding valuations, with a TP of INR2,250.

Revenue in line with our estimate and beat on margins; ARPU grew 9% YoY

* INMART reported 1QFY27 revenue of INR4b, marking 11% YoY growth, in line with our estimate of 9.6%.

* Collections stood at INR4.7b (+8% YoY). Deferred revenue rose 16% YoY to INR20b.

* Paying subscribers declined by 1.9k QoQ. ARPU grew 9% YoY to INR69k. ? EBITDA margin was 35.3%, up 9.8% QoQ and above our estimate of 33%, driven by a decrease in manpower cost (headcount down 4% YoY).

* Adj. PAT was INR1,722m, up 12% YoY, above our estimate of INR1,179m due to higher-than-expected other income.

* Total suppliers on the platform stood at 8.8m, up 5% YoY.

* Total cash and investments stood at INR3.5b.

Valuation and view

* We are confident of strong fundamental growth in operations, propelled by:

1) higher growth in digitization among SMEs

2) the need for out-of-the-circle buyers

3) a strong network effect; 4) over 70% market share in the underlying industry

5) the ability to improve ARPU on low price sensitivity

6) higher operating leverage.

* We value INMART on a DCF basis to arrive at our TP of INR2,250. Reiterate BUY.

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