Q4FY23 Review: IndiaMART InterMESH: Healthy subscriber addition; margins bottomed

2 May 2023 , 12:42 PM

IndiaMART (INMART)’s Q4FY23 revenue of Rs 2.69 billion grew 33% YoY (27% organic), tad above IIFL Capital Services’ estimates of 31%. Paying subscriber addition in Q4 was healthy at 8.6k, in line with management guidance of 8k-9k range. Collections increased to Rs 4.2 billion, growing 31.4% YoY, tad above IIFL Capital Services’ estimates. At 24.6% (-330 basis points QoQ/-380 basis points YoY), EBITDA margin was below IIFL Capital Services’ estimate of 26.4%, as INMART continued to invest in manpower, product & technology and sales & servicing. The company announced the approval of 1:1 bonus shares. Management expects to continue to add 8k+ paying subscribers in each quarter in FY24; margins to trend higher as operating leverage kicks in. 

Analysts at IIFL Capital Services have reduced their FY24/25 EPS estimates by 2/3%, on lower margin assumptions led by higher investments. However, their DCF-based 12-month Target Price has now increased to Rs 5,400 (from Rs 4,900) on roll forward. At current valuations of 40x and 29x FY25 estimated P/E and EV/EBITDA, respectively, the risk–reward looks balanced.

Sustained growth with steady margin improvement could rerate the stock. Execution is key, while risk–reward is currently balanced. Successful integration of acquisitions could provide upside risks.