CarTrade share price: You might not be able to recover your investment in CarTrade even after a year – The Economic Times

Clipped from: https://economictimes.indiatimes.com/markets/stocks/news/you-might-not-be-able-to-recover-your-investment-in-cartrade-even-after-a-year/articleshow/88205304.cmsSynopsis

Going by the views of the first analyst to start coverage on the stock, you might not recover your investment even after a year.

NEW DELHI: If you are among the investors who gotCarTradeNSE 8.60 % Tech’s shares during the book building process in August, you must be rueing your decision given that the share is trading at nearly half of the IPO price. And if you are hoping for things to turn around soon, you are in for a rude shock.

Going by the views of the first analyst to start coverage on the stock, you might not recover your investment even after a year.

Analysts at Citigroup Global Markets have initiated its coverage on the counter with a buy at current prices, but have set the 12-month target price at Rs 1,130, which is 30 per cent lower than the issue price of 1,618. Its bull case price target was at Rs 1,570, assuming 25,000 transactions per year in the used-car business and 20 per cent higher revenue in the classified business. The bear case target has been set at Rs 727, which assumes 20 per cent lower revenues in the classified business. Cartrade Tech last closed at Rs 892. It had hit a low of Rs 880 earlier this week.

Stock AnalysisStock score of Cartrade Tech Ltd is 3 on a scale of 10. View Stock Analysis »
“Used-vehicle retail, historically inefficient and cumbersome, is at the forefront, and both dealer-centric and dealer-substituting business models have emerged in recent years and found rapid traction. We initiate (coverage) with a buy on CarTrade, with its asset-light, dealer-centric, profitable business model,” said Vijit Jain of Citigroup.

He has valued CarTrade on a SoTP basis – valuing the ads and the lead-gen business separately from the auctions/inspections business, in which CarTrade has 55 per cent equity stake. “We don’t assign a high risk rating as the business is profitable and as we see no balance sheet risk in this business model,” he said in a note earlier this week.

India’s online auto market has potential. Across the legs of the automotive purchase journey, the cumulative addressable market was estimated at $10 billion in 2020. The space is highly competitive. Several players have raised a cumulative $2 billion in the last few years.

“CarTrade is relatively strongly positioned with its leadership in user traffic, online plus offline vehicle auctions platform, and upcoming franchisee-based pure marketplace model for used-car retailing,” Jain wrote. “While CarTrade trails peers in the used-car C2B/B2C opportunity, it leads the market in B2B and competition in new vehicles, especially in the research and discovery phase. We expect it to generate FY20-26 CAGR of 18 per cent on the top line and 31 per cent in Ebitda from these businesses.”

Most analysts were bullish on the IPO and had advised investors to apply for it. That included Anand Rathi, Ashika Research, BP Equities, Hem Securities, ICICIdirect, Motilal Oswal and Nirmal Bang. Canara Bank Securities was the only broker that had advised to avoid the issue.

CarTrade is a multi-channel auto platform with coverage and presence across vehicle types and value-added services through its brands CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz. It raised Rs 2,999 crore from the market during its IPO.

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