Axis Cap Comments on CarTrade Tech

  • CarTrade is a play on digitalization and consolidation trends.
  • Digitalization and consolidation key growth drivers for auto portals.
  • TAM/ EBITDA pool in FY30E for auto portals.
  • Dominant presence in highly-profitable new car and auction business.
  • Expect revenue/ EBITDA to grow 4x/ 10x over next 5 years.
  • Strong growth opportunities across business segments.
  • See next FY21-26 with strong FCF.

Earlier this week Citi has initiated Buy with a target price of 1130

Citi’s take on CarTrade Tech

“We initiate on CarTrade with a Buy rating and a TP of Rs1,130/sh. We think the stock is relatively inexpensive at CMP, implying FY23E Adj EV/Revenue of 11x vs >20x FY23E EV/S for leading classifieds businesses. We think CarTrade has distinct advantages in both the consumer as well as dealer side of the business, which position it well to benefit from digitization in the automotive ecosystem”

On the consumer side, CT has among the highest monthly traffic trends among peers with 85%+ organic share. India’s new-vehicle sales business has been adversely affected since FY19 owing to BS-IV to BS-VI transition and then pandemic-induced disruptions, including the supply chain shortages. Going forward, as the automotive market recovers, ad budgets for OEMs should rise, which along with shift in ad budget from offline to online should benefit CarTrade.

On the dealer side, CT’s wholesale/offline auction business (through SAMIL) with >200k transactions/yr run-rate gives it the leadership position in the B2B/wholesale space among its peers – we estimate CT has 20%+ market share in the entire wholesale auctions market and 50%+ market share among organized players.

CarTrade Tech to invest $100 million, eyes new acquisitions to accelerate growth

CarTrade Tech plans to deploy up to USD 100 million (INR 750 crores) to strategically acquire and invest into companies in the automotive space.

Vinay Sanghi, Founder & Chairman, CarTrade Tech said: “We want to completely digitize the process of buying and selling vehicles and continue to be a key enabler in the growth of the auto ecosystem. To facilitate this, we are looking to deploy up to $100 mn for acquiring and investing into companies that are driving innovation in the auto ecosystem, so that we can offer the consumer a great online auto shopping and ownership experience.”

Company Description

CarTrade is an online + offline auto platform with a presence across the vehicle transaction value chain in India. The company offers solutions across marketing, buying/selling, financing/insuring new and used cars, 2Ws, and pre-owned CVs and farm and construction equipment.

CarTrade’s consumer websites, carwale & bikewale, have a leading traffic market share among auto-verticals in India. CT monetizes its consumer websites primarily through a ‘Classifieds’ model – OEM advertisements (new vehicles) & dealersolutions (lead-generation). It is also rolling out its franchisee-based pure marketplace model for transactions in the used-car space (named ‘Absure’, launched in 9 cities as of Sep’21). CarTrade also has an online + offline ‘Auctions’ platform (55.4% equity stake) – Shriram Automall for offline auctions & CarTradeExchange for online auctions. This platform – the largest wholesale auctions platform in India – facilitates auctions of repo + de-fleet vehicles between financing/fleet companies and used-car dealers and monetizes through commissions + value-added services.