Zomato, Info Edge, and IndiaMART Intermesh shares have not had a pleasant 2022 so far. Indian internet companies plummeted severely along with global peers at the beginning of the year and then the fall was exacerbated by other headwinds that took global markets down. However, analysts at Edelweiss believe internet companies will report robust revenue growth on the back of strong cash collections. “For Q1FY23, we estimate on-quarter revenue growth of 8.5%, 12.2%, 5.7% and 6.1% for Zomato, IndiaMART InterMESH, Info Edge, and Just Dial, respectively,” Edelweiss said.
Zomato stock has tanked 61% so far this year while that of IndiaMART is down 41%. Info Edge stock price has dived 31% during the same period. Analysts believe the correction in these stocks has now made valuations attractive. “The stocks have corrected 50–70% from their 52-week highs on the back of valuation re-rating, and valuations are now attractive along with a strong growth outlook,” Edelweiss said.
Strong cash collections to continue
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The Internet firm had reported healthy cash collections in the last quarter of the previous fiscal year, which is expected to continue. “Zomato’s order growth momentum is expected to continue, with 6.1% QoQ estimated order growth. AOVs are likely to remain flat, resulting in 6.2% QoQ GOV growth. For IndiaMART, paying subscriber addition of 9,000, flat ARPU and Busy’s acquisition are likely to drive growth,” Edelweiss said. For Just Dial, analysts expect 4% QoQ growth in campaigns and 2% QoQ growth in realisation.
Acquisitions for internet companies are also looking well placed. Zomato’s acquisition of Blinkit would be crucial for Zomato to capture synergies from delivery fleet integration. While IndiaMART will look to leverage its Busy Infotech acquisition for creating cross-selling opportunities for SMEs.
Valuations reasonable after correction
Valuations of Internet companies are now believed to be attractive after a sharp correction in recent months. “Info Edge is our preferred pick given its leadership position (via Naukri), long revenue growth runway and superior capital allocation track record. IndiaMART continues to be a dominant player in the B2B segment, and paid suppliers addition is expected to remain strong,” Edelweiss said. Zomato has corrected heavily from its high owing to the impact of correction in tech stocks globally and concerns around the Blinkit acquisition. While Just Dial is believed to be trading cheap, analysts do not find its growth prospects encouraging.
Zomato has a buy rating with Rs 80 per share target price. IndiaMART target price is at Rs 6,342 apiece, and Info Edge target price is set at Rs 4,700 per share. Just Dial has a reduce rating.