New age tech firms to deliver sustainable growth, ramp up profitability: JM Financial

JM Financial’s top picks are Zomato and Nykaa.

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As profitability is taking centre stage not just in the management commentary of new age tech companies but also the numbers reported by them during the last quarter, JM Financial believes there is an enhanced investor comfort on the ability of new age stocks to deliver sustained profitability.

The confidence reflects the surge in stock prices of new age tech stocks in the last few weeks. This has also led to funds invested in them delivering big returns.

“Going forward, we expect companies to deliver sustainable growth while ramping up profitability. While Zomato and Nykaa are expected to see sequential growth in Q1 with Delhivery’s PTL (Partial Truck Load) business continuing to improve post Spoton integration, PB Fintech would see a sequentially subdued quarter due to seasonality. Though wage hikes in Q1 could result in margin compression, focus on profitability is expected to continue with contribution margins expected to expand,” said Sachin Dixit of JM Financial.

JM Financial’s top picks are Zomato and Nykaa.

Below are its opinion on some of the key names:

Affle: The ad-tech industry worldwide continues to reel under a slowdown, with no signs of advertisers loosening their purse strings on ad spends. There is also the pressure of funding winter on high-growth businesses. Thus, Dixit expects organic revenue growth to remain muted.

CarTrade: With supply-demand mismatch normalising as well as new model launches, the broker expects CarTrade’s New Auto business to grow 4 percent sequentially and 28 percent on YoY basis considering the sustained strength in new auto sales.

Delhivery: JM Financial expects Delhivery’s express parcel business to see marginal growth in volumes with sequential improvement in e-commerce while PTL business would continue normalising post Spoton integration, though impacted by seasonality as Q1 is generally a muted quarter across both these segments.

Easemytrip: Strong demand for air travel and non-air businesses could continue to support gross booking revenue growth of 48 percent YoY (+15 percent QoQ). Revenue is likely to grow 52 percent YoY (+14 percent QoQ) due to rationalisation of upfront discounts.

Info Edge: We expect standalone business billings to grow 11 percent YoY (-23 percent QoQ due to seasonality). Despite continued weakness in IT hiring trends, recruitment business billings are likely to grow 8 percent YoY with hiring trends in non-IT expected to remain strong.

Zomato: We are building a 8 percent sequential growth in Food Delivery GOV in 1QFY24 driven by market share gains and seasonality. Growth would largely be driven by order volumes due to the presence of ‘Gold’ in the entire quarter and higher calendar days in June quarter, JM Financial said.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.