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Profitability Continues to Be the Buzzword Among Tech Companies

The profitability of listed and private new-age tech or internet companies remains a hot topic. While these companies have achieved operating profitability, many of them are now aiming for profitability at the PAT level. This shift in focus reflects the maturity and growth potential of these companies in the long run. However, some stocks that have recently shown strong exuberance may have limited upside in the near-term, according to experts.

In the coming months, leading indicators for Q3 will play a crucial role in determining the performance of these stocks. With the festive season and the world cup coinciding, companies like Zomato, Nykaa, CarTrade Tech, Delhivery, EaseMyTrip, and Affle (India) are expected to benefit from strong seasonality.

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IndiaMart InterMesh: Positive Outlook for Q2FY24

JM Financial predicts that IndiaMart InterMesh will experience sequential paid subscription additions of approximately 4,500 in Q2FY24, which is slightly lower than the management’s guidance. However, this discrepancy is primarily due to recent price hikes and a high base from the previous year’s subscriber additions. Despite this, IndiaMart InterMesh is expected to deliver strong revenue growth of 25% YoY in Q2FY24, driven by increased volume and ARPU (Average Revenue Per User). Furthermore, the brokerage expects EBITDA margin expansion of 60 bps YoY to 28.5%, with a growth rate of 27% YoY for EBITDA and 18% YoY for net profit. As a result, the brokerage has given a ‘Buy’ rating on the stock with a target price of Ôé╣3,300 per share, indicating an upside of 16.4% from Wednesday’s closing price.

CarTrade Tech: Mixed Prospects for Q2FY24

CarTrade Tech’s standalone business is expected to grow 9% sequentially and 26% YoY due to consistent strength in new auto sales. However, the B2B Remarketing business is unlikely to recover yet, with a 7.5% dip in revenue on a YoY basis. Nevertheless, the recent acquisition of OLX is expected to yield long-term synergies for both businesses. JM Financial maintains a ‘Buy’ rating on CarTrade Tech with a target price of Ôé╣850 per share, expecting an upside of nearly 35% from Wednesday’s close.

Just Dial: Positive Outlook with Higher Revenue Contribution

Recent price hikes by Just Dial, coupled with competition among industry players, are anticipated to lead to higher revenue contribution from B2B campaigns. Additionally, profitability trends are expected to recover, driven by improvements in the productivity of the sales team, controlled A&P spend, and a scaling back of investments in new initiatives. JM Financial has given a ‘Buy’ rating to Just Dial, with a target price of Ôé╣830 per share.

Zomato: Improved Revenue Growth and EBITDA Loss

In the Food Delivery business, Zomato is expected to achieve sequential gross order value (GOV) growth of 4% (+15% YoY) amid heightened competitive intensity. Furthermore, Zomato’s reported revenue growth is projected to be relatively higher than GOV growth due to recent improvements in take-rates. At a consolidated level, Zomato’s reported EBITDA loss is expected to narrow down to Ôé╣6 crore in Q2, compared to a loss of Ôé╣48 crore in Q1. JM Financial has a ‘Buy’ rating on Zomato with a target price of Ôé╣115 per share.

Nykaa: Growth Potential Driven by Operational Efficiencies

FSN E-Commerce Ventures, the parent company of Nykaa, is expected to achieve significant GMV/Revenue/EBITDA CAGR over the FY23-26E period. The company’s growth will be supported by regional warehouses to reduce fulfillment costs, optimization of marketing costs, and optimization of the category mix in fashion. JM Financial recommends a ‘Buy’ rating on Nykaa, with a target price of Ôé╣210 per share, suggesting an upside of over 41%.

PB Fintech: Marginal Improvement in Profitability

PB Fintech is expected to show only marginal improvement in adjusted EBITDA level profitability in this quarter. However, the company is projected to reach Ôé╣100 crore in net profit in FY24. Over the FY23-26E period, the brokerage forecasts PB Fintech to deliver a CAGR of 30% for insurance premium, 28% for loan disbursals, and 30% for revenue. JM Financial recommends a ‘Buy’ call on PB Fintech with a target price of Ôé╣980 per share, expecting an upside of 31%.

Route Mobile: Stable Revenue Growth and Promising Partnerships

Route Mobile is expected to experience a 22% YoY (7% QoQ) revenue growth, mainly driven by an increase in ILD/NLD pricing, expansion of partnership with Amazon in newer geographies, and recent firewall deal wins. JM Financial has a ‘Buy’ call on Route Mobile with a target price of Ôé╣1,900 per share, indicating an upside of 22%.

It is important to note that the above financial views and recommendations are provided by individual analysts or broking companies and not directly by Mint. Investors are advised to consult certified experts before making any investment decisions.

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