IndiaMart jumps 6% on strong Q3 earnings, analysts foresee business growth

In the last one year, IndiaMART stock has risen 17 percent, slightly underperforming benchmark Nifty 50 which has risen over 19 percent during this period

Shares of IndiaMart IndiaMesh Ltd jumped over 6 percent on January 19, a day after the company reported in-line quarterly earnings. Its revenue jumped 21 percent on-year to Rs 305 crore, and operating profit came in at Rs 77 crore, led by lower employee costs during the quarter.

From a long-term perspective, IndiaMart is well-placed for encouraging growth in light of the multiple long-term contracts it has procured from the world’s leading brands, said Axis Securities.

"Richer revenue visibility also gives us further confidence in its business growth moving forward," the brokerage said as it put a 'buy' rating on the stock with a target price of Rs 3,000 per share.

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At 11am, IndiaMart shares were trading 5.5 percent higher at Rs 2,627.70 on the National Stock Exchange (NSE). In the last one year, the stock has gained over 17 percent, slightly underperforming the benchmark Nifty 50, which has risen over 19 percent during this period.

According to Nuvama Institutional Equities, IndiaMart's slowing subscriber addition began to fall in line with collection growth. "We believe consistent higher churn and lower unique business enquiries would lead to slower growth in coming quarters," it said.

The company has delivered consistent growth since Covid, led by a mix of volume and realisation growth. However, for the past three quarters, growth has been led largely by higher realisation, noted Nuvama.

"Persistently slower growth in buyer-side metrics such as registered buyers, unique business enquiries and business enquiries delivered remains a key concern and calls for a serious course correction," it said.

The brokerage believes that IndiaMart has a long growth runway considering that paid subscribers constitute only 2.4 percent of its storefronts. The company has a large number of visitors and business enquiries, which can support growth in paid customers for a long time, it said.

"With strong value proposition for the customer, the company has demonstrated pricing power and has taken price hikes, which improves its growth and profitability," Nuvama noted.

Also, since most of the cost pertaining to the platform are fixed in nature, the business model has demonstrated high operating leverage which will drive margin expansion over the longer term, the brokerage said.

IndiaMart Q3 results: Net profit drops 27% to Rs 82 crore

"IndiaMart is uniquely positioned to drive digitisation of the SMEs and it can help its investee companies scale up with its reach and by offering bundled products. This will create sticky business for IndiaMart as well as its investee companies," Nuvama said as it maintained a "hold' rating on the stock with a target price of Rs 2,800.

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