Motilal Oswal Says Buy For 23% Return, This Digital Business Stock's Revenue Up 24% YoY, Significant Subscribe

Top brokerage firm Motilal Oswal suggests investors to buy the stocks of IndiaMART. This midcap company has delivered a strong performance in 1QFY23, with revenue up 24% YoY and 12% QoQ. Collections grew a strong 49% YoY to Rs. 2.5b, suggesting good visibility on FY23E revenue growth.

Stock To Buy: Target Price, Current Market Price

The Current Market Price (CMP) of IndiaMART is Rs. 4077. Motilal Oswal has estimated a Target Price for the stock at Rs. 5000. This stock has the potential to give a 23% return, in the upcoming 1 year. This is a mid-cap stock with a market capitalization of around Rs. 12,298 crore.

Stock Outlook
Current Market Price (CMP)	Rs. 4077
Target Price	Rs. 5000
Potential 1 year return	23.00%
52 week high share price	Rs. 9,710.70
52 week low share price	Rs. 3,676.00

The company's deferred revenue increased 32% YoY to Rs. 9.6b, which should support 25% revenue growth in FY23E. Strong paying subscriber additions (up 10k QoQ) are encouraging. EBITDA margin was largely flat QoQ at 28.6% due to lower than expected manpower expenses.

Motilal Oswal: Why Should You Buy This Stock?

Giving a buy status, about the Motilal Oswal said, "We expect IndiaMART to deliver 23% revenue CAGR over FY22-24 on the back of sustained paying subscriber additions and resumption of price hikes after a hiatus during the COVID-19 induced slowdown. With a good start to the integration of Busy Infotech (a revenue of Rs. 105m in 1QFY23), we continue to see expansion in its accounting software as a positive long-term driver for IndiaMART's business. We remain watchful on the performance of its other investments."

"While Busy Infotech remains synergistic to IndiaMART's customer base and can drive long-term differentiation, it needs to scale up to be a meaningful value add. We continue to view it as a key beneficiary of technology adoption within India's MSME universe as well as of a shift to a formalized ecosystem. We believe that the company remains poised to drive significant value due to its industry-leading position in the segment," the firm added.

Company portfolio

IndiaMART is India's largest online B2B marketplace, connecting buyers with suppliers; with 60% market share of the online B2B Classified space in India, the channel focuses on providing a platform to Small & Medium Enterprises (SMEs), Large Enterprises as well as individuals, the company says. They have around 154 Million buyers, around 7.2 Million suppliers, and around 86 Million products & services. With continued investments on growth, the management expects EBITDA margin to be in the 28-30% range in FY23. Our estimates indicate a gradual pickup in EBITDA margin as investments fall over FY24, and build in 31% margin in FY23. This, in turn, should drive 11% PAT growth over the same period.

Disclaimer

The above stock was picked from the brokerage report of Motilal Oswal. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.