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Robust financial performance; Operating margin expected to improve going ahead

Result Synopsis

Indiamart (INMART) reported broadly inline financial performance for the quarter. The sequential revenue and EBITDA margin were along expectation. It reported sequential revenue growth of 4.5% QoQ, led by 1.0% QoQ increase in the number of paid customers and around 3.9% QoQ increase in average realization. The growth in the number of paid customers was at around ~2k QoQ. There was sequential decline in EBITDA margin (down 26 bps QoQ) led by higher manpower cost. The Internet traffic to the portal and the number of registered buyers grew during the quarter as per the trend.

It has dominant market share in B2B classified business with around 65% market share in paid listings. The strong performance is led by higher value proposition for sellers leading to higher pricing power, efficient matching algorithm resulting in higher buyer satisfaction. The growth in paid customers is expected to be between 7k?8k per quarter going ahead. The growth in collections remain robust and provides strong growth outlook. Most of traffic on the portal is organic driven led by strong value proposition with little spending on advertising. EBITDA margin has stabilised after being under pressure recently and we expect it to reach around 30% by Q4FY23. We estimate revenue CAGR of 23.5% over FY23?25E with average EBITDA margin of 30.4% over the period. We maintain our BUY rating on the stock with revised target price of Rs 3,755/share based on DCF methodology. The stock trades at PER of 49.0x/35.9x on FY24E/FY25E EPS.

Result Highlights

? Reported revenue of Rs 2,947mn (up 4.5% QoQ, up 22.5% YoY). The sequential growth was led by 1.0% QoQ increase in the number of paid customers and around 3.9% QoQ increase in average realization.

? Total collection increased by 5.0% QoQ to Rs 3.37bn (up 28.0% YoY), led by addition of new customers and ongoing upgradation to premium packages.

? EBITDA margin decreased by 26 bps QoQ to 27.1%, led by increase in manpower expenses.

? Number of registered buyers was 182 mn for the quarter vs 175 mn in Q1FY24.

? Total traffic to the portal increased to 288 mn vs 254 mn in Q1FY24.

? The number of paid customers grew by 2k QoQ to 210k. While ARPU grew by 3.9% QoQ to Rs 53,525 for the quarter.

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