IndiaMART InterMESH has outperformed on all fronts in the September-quarter earnings driven by a quicker-than-anticipated rebound in paid suppliers. Collections reached 94 percent of the pre-COVID levels in Q2. Motilal Oswal reiterated 'buy' on the stock with a target price at Rs 5,830 given its strong fundamentals, growth in operations.
The brokerage said that the company's traffic and business inquiries were up 38 percent and 56 percent, respectively, from the pre-COVID levels, which provides confidence in the company sustaining the current momentum.
Also, the management is targeting to add 5,000 paid suppliers every quarter and is confident to breach FY20 levels by the end of Q4FY21.
IndiaMART is India's largest B2B online marketplace for business products and services. The company's Q2FY21 revenue rose 4.4 percent YoY to Rs 1.6 billion while the collections increased by 73 percent QoQ. The EBIT margin was the highest-ever at 47 percent on the back of optimization across cost items.
Motilal Oswal explained that the COVID-19 impact led to a 10 percent reduction in paid suppliers in Q1FY21 leading to a drop in collections by 50 percent. However, this rebounded sharply in the Q2 given the strong momentum.
"We expect a 12 percent/4 percent CAGR in paid suppliers/ARPU for FY20-23," said the report.
The brokerage remains confident in the company's strong fundamental growth in operations driven by a) high growth in digitisation among the SMEs, b) the need for out-of-the-circle buyers, c) a strong network effect, d) >70 percent market share in the underlying industry, e) the ability to increase ARPU on account of low price sensitivity, and f) high operating leverage.
At 1:57 pm, the stock traded 0.83 percent higher to Rs 4,999.95 per share on the NSE.
(Edited by : Ajay Vaishnav)