Jefferies initiates buy on IndiaMART InterMESH, price target Rs 2,500

Jefferies has initiated coverage on IndiaMART InterMESH with a buy rating and price target of Rs 2,500. The stock ended up 8% at Rs 2143.10 on Monday while BSE Sensex closed 38.88 points down at 41,642.66.

Company Financials

For the quarter ended 30-09-2019, the company has reported consolidated sales of Rs 156.60 crore, up 6.31% from last quarter sales of Rs 147.30 crore and up 27.84% from last year same quarter sales of Rs 122.50 crore. The company has reported net profit after tax of Rs 8.90 crore in the latest quarter.

The company’s top management includes Mr.Brijesh Kumar Agrawal, Mr.Dhruv Prakash, Mr.Dinesh Chandra Agarwal, Mr.Rajesh Sawhney, Mr.Vivek Narayan Gour, Mrs.Elizabeth Lucy Chapman. Company has S R Batliboi & Associates LLP as its auditors. As on 30-09-2019, the company has a total of 28,919,820 shares outstanding.

Investment Rationale

It is the dominant B2B classified platform in India in the long term with strong moats, said Jefferies. The brokerage expects 20% revenue CAGR over FY20-22 despite macro headwinds related to economic slowdown; this in turn should drive sharp margin expansion to 28% by FY22 versus 16% in FY19 given strong economies of scale. It is also free cash flow positive helped by upfront collections and low capex, said Jefferies.