Buy IndiaMART InterMESH; target of Rs 5960: HDFC Securities

HDFC Securities' research report on IndiaMART InterMESH

IndiaMART posted a strong 4Q with better-than-expected revenue growth (+6.9% QoQ) and impressive cash collections (+31% YoY). The growth was led by strong supplier addition (~9K) and improving realisations (+2.3% QoQ). The company invested in a sales engine in FY23, which has moderated margins but accelerated growth. The strong cash collections provide visibility for >25% YoY growth in FY24E. The margin will gradually expand to >30% as most are the investments are behind and headcount growth will be in line with paid supplier growth. The management expects that paid supplier addition will be maintained at ~8-9K per quarter and ARPU will continue to improve as customers move up the value chain. We maintain our positive view on IndiaMart based on (1) better growth visibility led by strong collections; (2) lower churn across client buckets; (3) margin expansion possibility; and (4) an increase in realisation led by platinum clients.

Outlook

We maintain our EPS estimates and have a BUY rating with a DCF-based TP of INR 5,960 (~34x Dec-24E EV/EBITDA), supported by revenue CAGR of 24% over FY23-25E.