19 January 2021
IndiaMART
3QFY21 Results | Sector: Technology
IndiaMART
Estimate change
TP change
Rating change
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Financials & Valuations (INR b)
Y/E Mar
2021E 2022E
Sales
6.7
8.4
EBITDA
3.3
3.7
PAT
3.1
3.5
EPS (INR)
105.1
120.4
EPS Gr. (%)
104.9
14.5
BV/Sh. (INR)
300.6
468.2
Ratios
RoE (%)
74.1
49.8
RoCE (%)
75.0
49.8
Payout (%)
11.5
12.5
Valuations
P/E (x)
70.4
61.5
P/BV (x)
24.6
15.8
INMART IN
29
215.7 / 3
8375 / 1641
16/227/228
563
CMP: INR 7,406
TP: INR 9,000 (+22%)
Buy
Higher resilience in margin offers a positive outlook
IndiaMART delivered strong operational performance during 3QFY21, led by
robust increase in paid suppliers (at 7k v/s their target range of ~5k).
Collections were up 9% sequentially but flat on a YoY basis.
Margin showed great resilience, with the company reporting the highest
ever EBIT margin of 48.4% (v/s our estimate of 39.8%) on lower variable pay
and stable employee count.
Leading indicators such as traffic and business inquiries are up 35% and 38%
YoY, offering confidence on the sustenance of the current momentum.
While we concur that margin at current levels are not sustainable, the
company will see a structural shift in operations from pre-COVID levels. Half
of the savings, led by cost optimization, would continue to flow through on:
1] permanent optimization in G&A (reduction in offices to 40 from 80), 2]
sales through channel partners are making cost more variable (would lead to
reduction in total employees), 3] movement of BPO to cloud telephony
system (would lead to 10% savings per seat), and 4] reduction in travel
expenses by shifting some of the meetings to video conferencing.
For
9MFY21, revenue/EBIT/PAT grew by 4.6%/128%/178%.
The company has taken Board’s approval to raise INR11b. The same would
be majorly used to pursue inorganic opportunities around: 1] SaaS products,
2] fintech, and 3] vertical commerce. We view the business model
diversification as a positive step to upscale into the SME value chain.
We increase our FY22E/FY23E EPS estimate by 17%/16% as we anticipate
greater resilience on the margin front over the longer term.
We value IndiaMART on a DCF basis at INR9,000 per share (+22% upside)
assuming 11% WACC and 5% terminal growth rate, implying 62x FY23E EPS.
Reiterate Buy.
Revenue stood at INR1.7b (3% beat on our estimates), up 5.3% YoY and 6.4%
QoQ.
Total collections have now recovered back to pre COVID-19 levels at INR
1.8b, implying a sequential growth of 10%.
EBIT margin was the highest ever at 48.4% (v/s our estimate of 40%), +26pp
YoY and +100bp QoQ. This was led by continued optimization across all cost
items.
All traffic on the platform was organic in nature. The company has not
incurred any advertisement expenses.
PAT rose 102% YoY to INR802m, implying a PAT margin of 46%.
The Board has approved raising of funds, not exceeding INR11b. An
extraordinary general meeting is scheduled on 10 Feb’21 to seek approval of
its members for the proposed fund raising.
Traffic grew 35% YoY to 253m in 3QFY21 v/s 188m in 3QFY20.
2023E
10.3
4.5
4.2
145.3
20.7
675.6
40.4
40.4
10.3
50.9
11.0
Shareholding pattern (%)
As On
Promoter
DII
FII
Others
Dec-20 Sep-20 Dec-19
52.0
52.0
52.3
5.0
5.7
2.6
24.8
22.3
11.8
18.2
20.0
33.3
FII Includes depository receipts
Beat on all fronts! Board approves INR11b in fund raising
Anmol Garg – Research analyst
(Anmol.Garg@MotilalOswal.com)
Research analyst: Mukul Garg
(Mukul.Garg@MotilalOswal.com) /
Heenal Gada
(Heenal.Gada@MotilalOswal.com)
19 January 2021
1
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.