Whalesbook
Mixed Q3 Results Mask Key Concerns
Jefferies' rationale for the 'hold' rating pivots on a careful assessment of conflicting signals. While the company's recent 15% stock correction offers a cushion against further steep declines, the brokerage points to muted earnings growth prospects that are likely to cap significant upside. This led to the upgrade to 'hold' with a revised target price of ₹2,100, valuing the company at 18 times its earnings.
Indiamart Intermesh reported a 55.62% rise in consolidated net profit to ₹188.31 crore for the December quarter. Revenue from operations increased 13.35% to ₹401.6 crore year-on-year. However, normalised EBITDA rose only 4% year-on-year, falling below Jefferies' estimates. Conversely, normalised profit after tax (PAT) jumped 63% year-on-year, exceeding expectations.
Subscriber Churn and Pricing Pressures
A key negative highlighted was the continued decline in the paid subscriber base, which fell by 1,000 in the third quarter, missing analyst expectations. Despite management efforts to improve supplier satisfaction, customer churn remains elevated. Silver monthly plans see a 7% churn, while annual plans experience 4% churn, partly attributed to recent price hikes ranging from 12% to 30%. Factoring in these Q3 misses, Jefferies has reduced its subscriber base assumptions for FY26–28 by 1% to 3%.
Growth Outlook Revised Amid Valuation Support
Standalone collections grew 14% year-on-year, beating estimates. However, Jefferies believes sustaining collections growth above 15% would require subscriber expansion exceeding 5%, a scenario deemed unlikely in the near term. The brokerage anticipates collections growth to moderate to around 10%. Accordingly, revenue estimates have been revised, projecting an 11% CAGR in standalone and consolidated revenues over FY26–28.
While Ebitda margins contracted year-on-year, they surpassed expectations due to cost reversals. Jefferies has raised its FY26 standalone margin estimate by 60 basis points, with minor adjustments to FY27–28 figures. Over the longer term, margins are expected to normalise at 33%–34% as subscriber churn moderates. This outlook translates to an estimated 8% EPS CAGR over FY26–28.