JM Financial in its preview note on internet sector said companies such as Zomato Ltd, PB Fintech Ltd (Policybazaar), FSN E-Commerce Ventures Ltd (Nykaa), CarTrade and Affle Ltd are expected to sustain segment-leading growth, but Delhivery, IndiaMART InterMesh Ltd and Just Dial Ltd may see tepid growth rates in Q2.
"Info Edge is starting to show green shoots in billings growth. Zomato is expected to sustain robust growth and margin expansion, while Nykaa is likely to gain market share in a tough demand environment across its categories," it said. PB Fintech’s core insurance premium is expected to grow strongly driven by health insurance and savings, though contribution margins are likely to take a further hit, JM Financial said ahead of Q2 results.
"Among classifieds companies, CarTrade would deliver sustain its YoY growth trajectory with sharp sequential improvement in margins. Info Edge recruitment billings delivered strong growth after a few quarters. Delhivery would continue to face headwinds with self-logistics at Meesho now accounting for 40 per cent of its shipment volumes," it said.
While valuations have improved over the past year, JM Financial believes companies such as Nykaa, Zomato and CarTrade can still sustain the strength, with upside capped in PB Fintech.
Here's what it said on Q2 results of internet companies:
Zomato In the Food Delivery segment, JM anticipated a sequential gross order value (GOV) growth of 7 per cent (24 per cent YoY). It sees MTUs growing to 21.2 million against 20.3 million in 1QFY25. Ordering frequency and average order value (AOV) are seen growing 1 per cent QoQ and 2 per cent QoQ, respectively. Take-rates are likely to expand to 21.2 per cent in Q2 versus 21 per cent in Q1FY25 due to further increase in platform fees. A mix of robust GOV growth and take-rate expansion should lead to sequential revenue growth of 13 per cent.
“ We expect contribution margin (as per cent of GOV) to expand to 7.5 per cent from 7.3 per cent in 1Q, while Adj. EBITDA margin (as per cent of GOV) can expand 20bps sequentially to 3.6 per cent, aided by operating leverage. In quick commerce, we expect sequential GOV growth of 19 per cent led by robust increase of 17 per cent in order volumes,” JM said.
Take-rates can improve to 19.3 per cent from 19.1 per cent in Q1, driven by ad income and customer fees.
JM Financial sees contribution margin expanding to 4.1 per cent (as per cent of GOV) versus 4 per cent in Q1 as take-rate expansion could get offset by aggressive new store additions.
Factoring in ESOP cost of last quarter, it expects reported PAT to stand at Rs 229 crore versus Rs 253 crore in Q1.
Affle India JM Financial expects revenue for Affle India to grow 23 per cent YoY to Rs 530 crore (1.9 per cent QoQ) because of strong recovery trends in developed markets aided by a favorable base and other emerging markets (ex-India) continuing to do well.
"India business, however, is likely to once again report around mid-teens growth. We expect gross margins to remain sequentially stable at 38.5 per cent, but down 100 bps YoY as the company continues to focus on sustaining topline growth, limiting any major gains," JM said.
The domestic brokerage expects Ebitda margin to expand 20bps YoY to 20.4 per cent due to operating leverage, whereas EBIT margin is expected to expand 70bps YoY to 16.6 per cent due to lower D&A as per cent of revenue.
"Accordingly, we forecast Ebitda/EBIT to grow 24 per cent/28 per cent YoY. PAT should expand 29 per cent YoY to Rs 86.2 crore, aided by improving operating performance and lower D&A," it said.
CarTrade JM Financial expects CarTrade’s new auto business to grow 9 per cent sequentially and 21 per cent YoY considering the sustained strength in new auto sales along with sharp rise in OEM ad spends as a per cent of revenue.
With sustained bottoming out of repossessions and a higher mix of retail business, remarketing segment is expected to recover and deliver a sequential revenue increase of 20 per cent (2 per cent YoY).
"On OLX front, we should see a 4 per cent sequential rise in revenue with management’s focus on auto category delivering results. Overall, CarTrade should deliver 30 per cent YoY revenue growth in 2QFY24. Adj. EBITDA margin (excluding ESOP expense) should see a sharp jump of 300bps sequentially (130bps YoY) to 22.6 per cent," JM said.
Considering the fixed cost structure, the company tends to deliver sharp jump in adjusted Ebitda margin across the year.
"We expect CarTrade’s New Auto business to rather benefit in the current environment with supply outpacing demand instead of getting impacted due to the lower growth in auto sales," it said. Delhivery JM expects 6.2 per cent YoY shipments growth in Express Parcel segment (EPS) with Meesho’s in-housing (40 per cent of volume mix) continuing to be a headwind. Further, it expects PTL business to deliver tonnage growth of 20.4 per cent YoY and realisation growth of 1.7 per cent.
"On a YoY basis, Express Parcel revenue is expected to grow ~9 per cent while PTL revenue should see 22 per cent growth. With the scaling up of contracts along with revenue kicking-in from marquee clients onboarded last year, we expect Supply Chain Services to grow at 34 per cent YoY, however decline sequentially by 15 per cent due to base effect of a seasonally strong Q1," JM said.
On a consolidated basis, Delhivery should see revenue increase of 2.3 per cent/14.4 per cent QoQ/YoY, it said.
"With incremental gross margins continuing to be strong, we expect Delhivery to report gross margin improvement of 50bps QoQ/ 200bps YoY. Further, with wage hike impact incorporated in the previous quarter, adjusted Ebitda margin is expected to expand 25 bps QoQ (260 bps YoY) to reach 2 per cent. PAT is expected to decline from Rs 54.4 crore in Q1 to Rs 16.60 crore due to one-off benefits in the previous quarter," it said.
IndiaMART Intermesh JM expects IndiaMART Intermesh to see only 2,700 QoQ paid supplier additions in the core classifieds business, due to persistently high churn rates in Silver subscriptions on account of poor quality leads.
While this would be marginally better than Q1 additions of 1.5k, it will remain well below the management’s target of 5,000-6,000. Cash collections growth is expected to decelerate for the fourth consecutive quarter to 13 per cent YoY against 14 per cent YoY growth last quarter. This would be due to slowing upsells, again below management aspirations of 20-25 per cent.
"While revenue growth could be better than collections growth at 16.6 per cent YoY, it is a marked slowdown from 30.8 per cent/21.5 per cent/17.4 per cent in FY23/FY24/1QFY25. The only positive expected is Ebitda margin, which may expand 800 bps YoY due to lower operational costs and sales incentives in the absence of weak subscriptions and collections growth," it said.
The management commentary on paid subscriptions churn trends and investments in accounting services segment will be keenly watched.
Info Edge Info Edge's segment-wise billings were reported by the company on October 7. Recruitment segment billings growth accelerated to 14 per cent YoY from 8.5 per cent YoY in the previous quarter, the fastest billings growth after several quarters of weakness, likely attributable to strong hiring recovery in IT. The 99acres segment saw 16.5 per cent YoY billings growth, higher than 10.4 per cent YoY in Q1, however, lower than expectations as strong recovery was anticipated after Q1 being affected by elections and heat wave. Others segment (which includes Jeevansathi and Shiksha) saw 12.1 per cent YoY growth, a disappointment against strong growth of 28.4 per cent YoY in Q2.
"Standalone revenue should see growth of 9.2 per cent YoY, led by 7.3 per cent/15.7 per cent/14.7 per cent YoY growth in Recruitment/99acres/Others segment respectively. We forecast Ebitda margin to contract by 50 bps YoY to 40.2 per cent (39 per cent in Q1FY25), due to pressure on recruitment business margins. Segment-wise, PBT margin for recruitment business could contract by 400 bps YoY due to continued technology and platform investments amidst muted revenue growth," JM said.
It sees PAT growth of 11 per cent YoY. The management commentary on demand environment in recruitment and A&P spends in 99acres and Jeevansathi should be keenly watched, JM said.
Nykaa JM expects Nykaa's gross merchandise value (GMV) to grow 22 per cent YoY, driven by core BPC GMV sustaining 23 per cent YoY growth, with GMV-NSV conversion expected to improve from 57.8 per cent in Q1 to 58.5 per cent this quarter. Muted demand environment in overall fashion industry may continue to persist, it said.
"A gradual revival is expected in 2HFY25, driven by weddings and festivities. Fashion GMV growth is likely to be muted at 12 per cent YoY, still continuing to gain market share with other online fashion platforms struggling harder. However, with declining leakages and lower RTOs, revenue conversion is expected to improve. eB2B and Nykaa Man is expected to gain share in overall business mix with GMV growth at 63 per cent/9 per cent YoY/QoQ and GMV-NSV conversion at 58.5 per cent," it said/
Overall, JM expects Nykaa to deliver 26 per cent YoY growth in Q2 revenue with 63 bps YoY Ebitda margin improvement. The management’s commentary on industry trends in BPC/Fashion in FY25, competitive landscape, continued supply chain investments and international expansion plans will be keenly watched.
PB Fintech JM expects PB Fintech to maintain its growth trajectory, forecasting a 52 per cent YoY growth in insurance premium with core insurance premium growth of 42 per cent YoY, while new initiatives could see a sharper ramp-up at 81 per cent.
"Paisabazaar disbursals are expected to decline 2 per cent YoY, however improve 29 per cent sequentially with the gradual recovery of unsecured loans as well as some early traction in secured loans. We expect revenue growth of 43.6 per cent / 7.6 per cent YoY for Policybazaar / Paisabazaar, as take-rates are likely to decline in insurance and improve in credit disbursals," it said.
JM Financial expects the group contribution margin at 29.1 per cent with core contributing margin likely to further get dented with sustained rise in new health insurance.
"Additionally, we expect adjusted Ebitda margin expansion of 280bps/190bps on a YoY/QoQ basis to reach 4.4 per cent, as strong topline growth delivers operating leverage. Management commentary around recent decision to foray into healthcare should be keenly watched," it said.
Route Mobile JM expects revenue growth for Route Mobile to come in at 11 per cent YoY, driven by VI firewall deal and start of accrual of revenue from Telesign. But it sees sequential 60 bps deterioration in gross margin to 21.5 per cent on account of lower margin profile of Telesign business.
"Weaker gross margins could in turn lead to Ebitda margin of just 12 per cent against 13.2 per cent/12.4 per cent in 2QFY24/1QFY25. As a result, Ebitda expansion will likely be limited to 1 per cent YoY. However, PAT is expected to increase strongly by 13 per cent/9 per cent QoQ/YoY due to higher other income," it said.
The brokerage believes the market will focus on management commentary on recently announced Microsoft and Proximus Group partnership benefits 2) expected revenue synergies from Telesign and operating margin guidance.