Hold Indiamart Intermesh Ltd For Target Rs. 2,880 by Axis Securities Ltd
Growth Stability; Marketing Expenditure to Accelerate
Est. Vs. Actual for Q1FY26: Revenue – INLINE; EBIT Margin – INLINE; PAT – MISS
Recommendation Rationale
• Higher Advertisement expenses: The company plans to maintain a quarterly budget of Rs 6-10 Cr for advertising to further optimise the platform. These expenses are more towards platform traffic, unique business inquiries, and business inquiries delivered/transactions.
• Customer churn and retention: Churn remains elevated for silver subscribers while it is well under control for gold and platinum subscribers. The management believes it might take a few more quarters to see positive impacts, especially on monthly subscribers.
• AI implementation: The company is leveraging generative AI for enhanced audit and classification capabilities, and further for cost optimisation and user experience. However, revenue opportunities from AI in the B2B space are yet to be fully realised.
Sector Outlook: Optimistic
Company Outlook & Guidance: The company guided an EBITDA margin of 30-35% in the long run. 30-33% sustainable margins are expected on the back of retention and sales, and marketing efforts.
Current Valuation: 25x FY27E P/E
Current TP: Rs 2,880/share
Recommendation: Given the company’s strong growth potential backed by a robust B2B platform and superior execution capabilities. We resume our coverage with a HOLD rating on the stock.
Financial performance
In Q1FY26, IndiaMart Intermesh reported a revenue of Rs 372 Cr vs Rs 331 Cr in Q1FY25, up 12.3% YoY and 4.8% QoQ. EBITDA stood at Rs 134 Cr vs Rs 119 Cr in Q1FY25, up 12.1% YoY and 2.4% QoQ, while EBITDA margin fell by 84 bps QoQ to 35.9% due to higher employee and other expenses. EBIT stood at Rs 127 Cr vs Rs 111 Cr in Q1FY25, up 14.1% YoY and 3.7% QoQ. Net Income came in at Rs 154 Cr vs Rs 114 Cr in Q1FY25, up 34.6% YoY but down 15% QoQ, led by higher loss of share of associates and tax expenses.
Valuation & Recommendation
The company continues to strengthen its position as a leading marketplace for MSMEs, and the key developments are likely to support higher revenue growth and margins in the long run. Therefore, we resume over coverage with a HOLD rating on the stock and assign a 25x P/E multiple to its FY27E earnings to arrive at a TP of Rs 2,880/share, implying an upside of 9% from the CMP.
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SEBI Registration number is INZ000161633
