Buy IndiaMART; target of Rs 2000: Motilal Oswal

What happened

IndiaMART reported second-quarter revenue growth of 9.6% from a year earlier, above Motilal Oswal's 7.4% estimate, while adjusted profit rose 9.4% and fell short of the broker's estimate. Motilal Oswal reiterated BUY with a target of Rs 2000.

Confirmed

Global impact / market context

The broker's BUY call rests on what it calls undemanding valuations, meaning the share price looks low relative to expected cash flows. Its Rs 2000 target is based on a discounted cash flow model, which estimates future cash the business will generate and values it today.

Analyst inference

The report says the current valuation already reflects uncertainty about customer churn, which means customers leaving, product-market fit and subscriber growth. Those concerns cap how much investors pay for each rupee of IndiaMART's revenue, even as deferred revenue, money billed but not yet recognised, rose 16%.

Analyst inference

What to watch

1. Watch whether second-half revenue, EBITDA and adjusted profit growth meet Motilal Oswal's forecasts of 7.1%, 9.4% and 8.8% year-on-year, since slower growth would undercut the BUY case. Confirmed
2. Track churn, product-market fit and subscriber growth, the three uncertainties the broker says keep valuations undemanding; improvement in any of them could support a re-rating toward the Rs 2000 target. Proposed
3. Monitor costs and other income, because second-quarter adjusted profit missed estimates due to higher-than-expected other income, and EBITDA margin expansion to 37.1% must hold to protect earnings. Analyst inference

Evidence

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