Indiamart Intermesh Shares Plummet 19% Despite Strong Q2 Results: Analyst Downgrades Outlook

Indiamart Intermesh's shares fell dramatically by 19% to Rs 2,447 on October 21, following a cautious outlook from analysts despite the company reporting strong Q2 earnings. The online B2B marketplace showcased a remarkable 94.7% year-on-year increase in net profit, reaching Rs 135.1 crore for the quarter ending September 30, 2024. However, the stock's decline was attributed to significantly slowed collection growth, which dipped to just 5% from 14% in the same period last year.

In response to these developments, Jefferies downgraded Indiamart Intermesh from a 'buy' to 'underperform,' lowering its target price to Rs 2,540 per share. The international brokerage noted that while the Q2 results were in line with expectations, the weakness in subscriber growth led to a moderation in collections growth, a critical negative aspect for the quarter.

Jefferies forecasts collections growth to fall between 10-15%, unless there are improvements in subscriber additions. The firm has also revised its estimates downwards by 4-12%, citing a concerning rise in subscriber churn despite management's efforts to address the issue.

The company's EBITDA margin, however, showed improvement, rising to 38.7%, up from 27.2% in the same quarter last year, indicating enhanced operational efficiencies. Additionally, deferred revenue rose to Rs 1,483 crore, reflecting a 19% year-on-year increase.

Nomura maintained a 'Neutral' stance on the stock with a target price of Rs 3,150, highlighting weak collections and low subscriber additions as key factors negatively affecting near-term prospects. The brokerage pointed out that, contrary to previous trends, the current environment of weak collection per customer growth coincides with consistently low subscriber additions, averaging around 2,000 per quarter over the last five periods.

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At around 3:00 PM, Indiamart Intermesh shares were trading at Rs 2,490, reflecting a 17.25% decline from the last close on the NSE. The stock is currently trading significantly lower than its 52-week high of Rs 3,198.

[Disclaimer: The information provided in this blog is for informational purposes only and should not be considered financial advice. Please consult a financial advisor before making any investment decisions.]