Indiamart Shares Dive 15% Despite Strong Earnings

IndiaMART InterMESH Ltd. shares took a significant hit on Monday, October 21, 2024, despite reporting strong second-quarter earnings. The online B2B marketplace experienced a 94.7% year-on-year surge in net profit, reaching ₹135.1 crore. However, the stock’s decline can be attributed to concerns over slow subscriber growth and moderating collections. Analysts from Jefferies and Nomura have expressed their cautious outlook, with Jefferies downgrading the stock and Nomura maintaining a “Neutral” rating.

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Indiamart Shares Dive 15% Despite Strong Earnings

Indiamart shares dropped 19% despite strong earnings

Shares of Indiamart Intermesh dropped 19% to Rs 2,447 during morning trade on October 21, despite posting strong second-quarter earnings. The B2B online marketplace saw a significant 94.7% year-on-year surge in net profit, reaching Rs 135.1 crore for the quarter ending September 30, 2024. While the company added 2,390 paid subscribers in the quarter, collections growth slowed sharply to 5%, compared to 14% in the same period last year.

This slowdown led Jefferies to downgrade the stock from ‘buy’ to ‘underperform’ with a reduced target price of Rs 2,540. The brokerage cited weak subscriber growth and projected collections growth between 10-15% unless subscriber additions improve. Jefferies also cut its earnings estimates by 4-12%, noting rising subscriber churn as a negative surprise.

IndiaMART’s EBITDA margin improved to 38.7%, up from 27.2% a year ago, reflecting operational efficiencies. Deferred revenue also grew 19% year-on-year to Rs 1,483 crore.

Nomura maintained a ‘Neutral’ rating with a target price of Rs 3,150, citing weak collections and low subscriber growth as key concerns for the near term. Shares were trading at Rs 2,585 at 10:20 am, down 14.2% from the previous close and significantly below the 52-week high of Rs 3,198.

Shares of IndiaMART InterMESH Ltd. fell as much as 15% on Monday, October 21, following the company’s Saturday earnings report, which led analysts to issue a cautious outlook. The online B2B marketplace reported a 94.7% year-on-year (YoY) increase in net profit, reaching ₹135.1 crore for the second quarter ending September 30, 2024.

The company added 2,390 paid subscribers sequentially during the quarter, but collection growth slowed significantly to 5%, down from 14% in the same period last year.

Operating EBITDA surged by 68.4% to ₹134.7 crore, compared to ₹80 crore in the same quarter last year, with the EBITDA margin improving to 38.7% from 27.2%. Deferred revenue also grew by 19% year-on-year, totaling ₹1,483 crore as of September 30, 2024. IndiaMART’s standalone deferred revenue was ₹1,426 crore, while Busy Infotech contributed ₹53 crore. The company reported cash flow from operations of ₹103 crore for the quarter, with a cash and investments balance of ₹2,449 crore.

Brokerage Jefferies downgraded the stock from “buy” to “underperform” and lowered its price target from ₹3,890 to ₹2,540, citing slow subscriber growth and moderating collections. Jefferies projected collection growth between 10-15% unless subscriber additions improve, and cut IndiaMART’s earnings estimates by 4-12%.

Nomura maintained a “Neutral” rating with a target price of ₹3,150, highlighting weak collections and subscriber growth as challenges for the near term. The company has seen consistently low net subscriber additions, averaging around 2,000 over the past five quarters.

Out of 21 analysts covering IndiaMART, eight recommend “buy,” four suggest “hold,” and nine advise “sell.” Following Monday’s decline, the stock was down 16%, trading at ₹2,523, and has turned negative for the year.