+91-9696969696
The brokerage is building in a 13 per cent fall in revenue run-rate over the next two quarters and a slow recovery thereafter. But it also anticipates a stronger recovery should the government package suitably address MSME challenges.
EdelweissNSE 4.93 % has given a buy rating to Indiamart with a target price of Rs 2,535, based on 33 times Q1FY22, rolling over the valuation to Q4FY22.
IndiaMART InterMESH’s (IndiaMART) fourth quarter results were significantly ahead of expectations despite the lockdown impact. That said, the management painted a gloomy outlook for MSMEs, which would translate to 10–20 per cent business mortality of its paying customers.
The company’s focus is now on customer retention via discounts and relaxed payment terms. It has undertaken cost-cutting measures such as salary rationalisation, cutbacks in discretionary spends, etc to absorb the impact on profit.
All in all, the brokerage is slashing revenue/PAT by 22 per cent/22 per cent for FY21E and 36 per cent/29 per cent for FY22E. It is building in a 13 per cent fall in revenue run-rate over the next two quarters and a slow recovery thereafter. But it also anticipates a stronger recovery should the government package suitably address MSME challenges. Besides, the lockdown would accelerate digital adoption, implying higher growth potential over the medium-to-long term.
The share price moved down by -0.88 per cent from its previous close of Rs 2297.35. The last traded stock price is Rs 2277.10. Incorporated in 1999, the company has a market cap of Rs 6643.89 crore.
Investment Rationale
The company management highlighted that the lockdown has hurt business activity, almost halving its traffic. Paying customers are requesting a pause in their subscription packages and/or validity extension. In order to minimise churn, IndiaMART is offering discounts and relaxed payment terms. The brokerage has built in a drop of 15,000 paying customers for Q1FY20 and a gradual addition after that.
The brokerage is cognisant of the weakness at hand, but remains optimistic for the long run as the lockdown would accelerate online shift. The stock is trading at 27.5 times FY22E EPS.
Financials
For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 170.10 crore, up 3.15 per cent from last quarter sales of Rs 164.90 crore and up 23.26 per cent from last year’s same quarter sales of Rs 138.00 crore. The company reported net profit after tax of Rs 45.00 crore in the latest quarter.
Promoter/FII Holdings
Promoters held 52.34 per cent stake in the company as of March 31, 2020, while FIIs held 12.24 per cent, DIIs 3.08 per cent and public and others 32.34 per cent.