After an over 10 percent jump just in July, brokerage house Axis Securities has selected IndiaMART InterMESH as its 'pick of the week'. This is on the back of a strong foothold in the B2B (business to business) digital platform, high growth opportunity for paid subscribers and strong June quarter results.
IndiaMART provides an online B2B marketplace for business products and services. It makes it easier to do business by connecting buyers (Indian small and medium enterprises SMEs, and large corporate) and sellers across product categories and geographies in India through business enablement solutions. The firm provides ease and convenience to buyers by offering a wide assortment of products and a responsive seller base while offering lead generation, lead management and payment solutions to its sellers.
The brokerage has a ‘buy’ call on the stock with a target price of ₹3,430, indicating an upside of 11 percent from its current market price of ₹3,110, as on July 31.
The stock has jumped 45 percent in the last 1 year and 44 percent in 2023 YTD, giving positive returns in all 7 months so far in this current calendar year.
Investment Rationale:
Strong foothold in the B2B digital platform: According to the brokerage, IndiaMART has a leadership position in India in B2B segment with over 60 percent market share in the country. The firm has 70 lakh registered suppliers with 36 percent of them buyers as well with 8 crore product listings across 56 industries. It also has 14.3 crore registered users/buyers on the platform and 100 percent of the traffic is organic. It commands a 71 percent traffic market share and is a clear leader in the subscription-based online B2B segment, informed the brokerage. It further added that the firm has a strong pricing power due to its quality offerings for sellers and higher ROI (return on investment). Also, the conversion ratio (paying suppliers to free suppliers) is only 1.3 percent for TradeIndia vs 2.3 percent for IndiaMART, it added.
High growth opportunity for paid subscribers: With a higher value proposition for the sellers, more and more will be willing to pay for listing services, it said. The factors which will drive conversion are (1) higher ROI for sellers, (2) increase in business enquiries, (3) ancillary services like logistics and inventory management and (4) enhanced customer satisfaction with efficient matching engine and analytics.
Strong Q1FY24 results: IndiaMART reported revenue of ₹282 crore in Q1FY24, up 5 percent QoQ and 26 percent YoY, which stood above expectations. The company’s operating profit also rose 20 percent QoQ to ₹84 crore, which was led by lower employee costs during the quarter. Its operating margins further improved by 200 bps to 27 percent, largely driven by moderated employee expenses. The company’s net profit for Q1FY24 stood at ₹94 crore, registering a growth of 41 percent QoQ, informed Axis Securities.
