Shares of Indiamart Intermesh surged 3.77% to ₹2,258.50 on January 7 after JM Financial upgraded its rating to ‘Buy’ from ‘Sell,’ citing a positive medium-term outlook following a significant 28% correction in the stock since its last coverage note.
Key Insights from JM Financial’s Report:
- Valuation and Performance:
- The stock has seen substantial de-rating due to weak collections growth in Q2FY25 and muted paying supplier additions over the past six quarters.
- Despite expected flat metrics for Q3, medium-term growth in standalone collections is forecasted at low-teens, compared to 5% YoY in Q2FY25.
- Improved Margins:
- Consolidated EBITDA margins are expected to remain elevated at 34-36% due to limited growth investments.
- The Free Cash Flow Yield (FCFF), including other income, is projected at over 6% on FY26 estimates.
- Valuation Metrics:
- The stock is currently trading at 28x NTM PER (ex-cash and other income), a significant 50% discount to its 5-year average of 56x.
- JM Financial has raised its margin forecasts and rolled forward its valuation to March 2026, setting a revised target price of ₹2,450, implying an FY26/27 ex-cash & other income PER of 30x/26x.
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