Shares of Indiamart Intermesh Ltd climbed 6 per cent in Tuesday's trade, as JM Financial upgraded the stock to 'Buy' from 'Sell' rating on favourable risk-reward, following a 28 per cent correction on the counter. The stock has seen significant de-rating due to a sharp deceleration in collections growth in the September quarter and muted paying supplier additions over the past six quarters. On Tuesday, Indiamart Intermesh jumped 5.73 per cent to settle at Rs 2,300.10 on BSE.
While JM Financial does not see a material improvement in these key metrics in the December quarter from a medium-term perspective, it sees collections in the standalone business growing around low teens against 5 per cent YoY in Q2, supported by mid-single growth in both paying suppliers as well as realisation.
Consolidated Ebitda margin, it said, could also remain elevated in the absence of meaningful growth investments. Post the recent correction, the stock is trading at 28 times NTM PE (ex-cash and other income), 50 per cent discount to own 5-year average of 56 times, the brokearge added.
"For a stock, with FCF yield (including other income) of over 6 per cent on FY26 estimates, this should cap downside in our opinion. We raise margin forecasts and roll forward for a revised March 2026 target price of Rs 2,450 (target price implies FY26/27 ex-cash & other income PER of 30x/26x)," JM Financial said on Indiamart Intermesh.
Indiamart Intermesh Q3 results preview Indiamart Intermesh's paying supplier growth has been muted since Q1FY24 and JM Financial does not see an improvement in that trend in Q3FY25 as well due to unfavourable seasonality and continued high churn rates in the Silver category.
"Our estimate of 1,800 QoQ paying supplier additions in the core classifieds business is well below the long-term historical average of 4,500. Moreover, high churn will again weigh on the company’s upsell funnel, leading to an adverse impact on average collections per paying supplier (mere 1 per cent YoY in 2Q as well),"
JM Financial forecast muted collections growth of 6 per cent YoY in Q3 against 5 per cent YoY last quarter.
"While revenue growth could be better than collections at 15.5 per cent YoY (up 1.4 per cent QoQ) due to robust deferred revenue, it continues to slow down from 30.8 per cent/21.5 per cent/17.7 per cent in FY23/FY24/1HFY25. On the other hand, savings on sales incentives/servicing costs in the absence of material improvement in paying suppliers could lead to Ebitda margin expanding by 8 ppts YoY. As a result, consolidated Ebitda could expand ~50 per cent YoY in 3Q," JM Financial said.