Maintain BUY on IndiaMART InterMESH - Holding its Ground - HDFC Securities

Mr. Amit Chandra, Institutional Research Analyst, HDFC Securities

We maintain BUY on IndiaMart, following a better-than-expected Q1FY22 both in terms of revenue and margin. The paying suppliers declined 3.9% QoQ (-6K) due to the second wave impact (April and May 21), but the +5.7% QoQ increase in realisation was a surprise. We maintain our positive stance, based on (1) higher visibility, given the 14% YoY growth in deferred revenue; (2) increased activity on the platform despite COVID (registered buyers/unique business enquiries/traffic increased +4.8/8.3/4.3% QoQ); (3) immense growth opportunity in the highly-underpenetrated B2B e-commerce space; (4) margin expansion on account of cost savings led by automation; (5) healthy cash reserves of INR 24.2bn that can be leveraged for further investments; and (6) expected boost to growth from adjacent offerings in accounting, logistics and SaaS based solutions. Our TP of INR 8,500 is based on 56x EV/EBITDA (DCF implied) at 1.3x the average multiple, supported by revenue/EPS CAGRs of +18/14% over FY21-23E.

1QFY22 highlights: (1) IndiaMart revenue stood at INR 1.82bn (vs. estimate of INR 1.74bn), registering a growth of 1.1% QoQ, driven by -3.9/+5.7% QoQ growth in paying suppliers/ARPU; (2) cash collections from customers/deferred revenue declined by -37.4/-1.5% QoQ; (3) business enquiries were up 8.0/23.7% QoQ/YoY and business enquiries per paying supplier increased 12/13% QoQ/YoY; (4) EBITDA margin was up 126bps QoQ to 48.8% (better than our estimate of 43.8%) due to -3.5/-11.9% QoQ decline in manpower/outsourced cost; (5) paying suppliers declined by ~6K vs. our estimate of a ~4K decline; (6) 80-90% of the customer decline was from monthly users; (7) renewal rates of top 10% of the suppliers stood at 90% vs. 94-95% pre-pandemic; (8) the unique buyer enquiries fulfilment ratio stood at ~40%.

Outlook: We expect revenue growth of +13.7/23.0%, based on paid supplier growth of +7.9/17.0% and APRU growth of 5.9/5.3% for FY22/23E respectively. EBITDA margin estimates stand at 45.2/43.8% for FY22/23E, leading to an EPS CAGR of 14% over FY21-23E.

Source : Equity Bulls

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