C.E. Info Systems Ltd (MapmyIndia), which enjoys 80 per cent market share in auto OEM navigation software, saw its shares soaring 37 per cent in just two sessions, following an initiation report by Goldman Sachs on the counter. With this, the stock has risen 40 per cent in four days of consecutive gains. The homegrown digital mapping company is well-poised to benefit from an early leadership position in fast-growth end-markets including automotive navigation, mapping devices, connected vehicles, telematics and government digitisation, Goldman Sachs said on June 19, as it suggested a 'buy' rating on the MapmyIndia stock with a 12-month target price of Rs 2,800.
On Friday, the stock climbed 14.28 per cent to hit a high of Rs 2,745.05 on BSE. MapmyIndia trades at a forward PE of 53 times in line with its own history, the foreign brokerage said.
Goldman Sachs said the core profit pool for the company lies in its IP protected digital mapping service built over more than three decades and overlaid with valuable data -- demographics, law & order, natural resources, infrastructure, other insights.
"We forecast a 38 per cent FY24-FY27E revenue CAGR and steady EBITDA margin in the 38 per cent to 41 per cent range. We expect the company to maintain high margins driven by a pickup in IoT led business growth (offers more revenue opportunity for high-margin mapping), supported by newer opportunities in people/goods mobility and the auto aftermarket, vs. the legacy auto OEM business. Because of its strong software backbone, CEIF is not capital intensive," the foreign brokerage said.
Goldman Sachs said the factors should support return on equity (ROE) of 28 per cent by FY27 against 22 per cent in FY24 and 19 per cent in FY19 and a 38 per cent EPS CAGR over FY24-FY27 against 19 per cent for auto OEMs and 12 per cent for IT companies.
"We offer incremental perspective on MapmyIndia’s IoT margin potential and contrast how profitability evolved at similar hardware led businesses at peers likeTrimble, and assess growth optionality from rising SUV + EV penetration," Goldman Sachs.
Catalysts for MapmyIndia includes a pickup from Hyundai/Kia contract win; pickup in faster-growth IoT business; and increase in EV led N-CASE adoption. Risks includes hardware-related margin dilution, open-source maps and M&A integration risk.