Buy Parent Stock Of MapmyIndia, Shares Can Surge 35%, Reported Strong Revenue Growth Of 35% YoY

Monarch Networth Capital is bullish on the parent company of MapmyIndia, C.E. Info Systems Limited. The brokerage suggests "buy" with a target price of Rs 1,710 per share. With the given target price, the brokerage sees a potential upside of 35% from its current level. It is a small-cap technology company with a market cap of Rs 6,851.77 crore.

C.E. Info Systems (MapmyIndia/MMI) saw strong revenue growth of 35% YoY/ 17% QoQ driven by higher contribution from Gtropy business and strong open order book. Margins were impacted due to pick up in device-led IoT business which is margin dilutive in the near term but accretive in the longer run.

Stock Outlook & Returns on Investment

The stock today opened at Rs 1,273 per share, currently trading at Rs 1,274.30 per share on NSE. The stock has fallen as compared to its previous close. The stock got listed on the stock exchange last year on 21 December. Its 52-week low level is Rs 1,128.80 and its 52-week high is Rs 1,917.40 on NSE, respectively.

It has given 3.05% negative returns in the past 1 week. Whereas in the past 1 month, it gave 8.48% negative returns and in the past 3 months, 2.43% negative returns, respectively. Since its listing i.e. December 2021, it has given 8.62% negative returns on investments.

 

Revenue growth remains strong

MMI reported strong revenue growth of 35% YoY (+17% QoQ) during the quarter to Rs.763mn mainly led by the A&M segment (51% of revenue) which saw 47% YoY growth (albeit on a lower base which was impacted due to covid). Strong open order book and traction in the IoT business also aided by the Gtropy acquisition (which saw revenues doubling sequentially) supported growth in this segment. C&M saw slower growth of 24% YoY during the quarter as the order book herein is lumpy; management suggested that underlying demand remains strong. Strong open order book at the end of FY21/22 suggest that revenue growth should remain strong further supported by traction in Gtropy business. We build in 40% CAGR growth during FY22-25E.

 

Margins impacted due to scale up in IoT business/higher marketing expenses

EBITDA margin saw a sharp decline of 606bps QoQ/617 bps YoY to 40% mainly due to pick up in device led IoT/Gtropy business, which is margin dilutive in the first year, but which picks up from the next year due to higher SaaS revenue contribution. Margins were also impacted due to higher marketing spends (5% of sales) which more than doubled sequentially and also due to investment in new product development. Margins excluding Gtropy business was at 50%. "We have lowered our EBITDA margins by 120bps in FY24E to factor in higher contribution from Gtropy business," the brokerage has said.

Valuation and rating

"We maintain our target PE multiple of 55x and arrive at a revised TP of Rs1,710 as we roll over to Sept'24 EPS; premium to global peers such as Trimble and Zenrin owing to its unique positioning in a high entry barrier market, niche and comprehensive product portfolio, superior execution capabilities, high margin profile - 40%+ EBITDA margins, and robust revenue growth visibility. Studies suggest that businesses in undiscovered sectors tend to trade at high valuations as investors draw comfort in growth/ROE and we see a similar case play out in MMI," the brokerage has said.

 

Disclaimer

The stock has been picked from the brokerage report of Monarch Networth Capital. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.