CE Infosystems - MapMyIndia - Improving business

 

 C.E. Info Systems (MapmyIndia/MMI)

saw strong revenue growth of 35% YoY/ 17% QoQ driven by higher contribution from Gtropy business and strong open order book. Margins were impacted due to pick up in

device led IoT business which is margin dilutive in the near term but accretive in the longer run. We factor in dilution in margins in FY24E (41.4% vs. 42.6% earlier). Strong open order book of Rs6.9bn as of March 2022 and increase in contribution from Gtropy leads us to believe that strong revenue growth should sustain going forward as we build in 40% CAGR revenue growth during FY22-25E. Given MMI’s positioning in the industry, impetus on accurate data (key criteria), asset-light model and healthy financials we believe premium valuations should sustain and continue to remain positive on MMI’s long-term prospects.

▪ Revenue growth remains strong: MMI reported strong revenue growth of 35% YoY (+17% QoQ) during the quarter to Rs.763mn mainly led by the A&M segment (51% of revenue) which saw 47% YoY growth (albeit on a lower base which was impacted due to covid). Strong open order book and traction in the IoT business also aided by the Gtropy acquisition (which saw revenues doubling sequentially) supported growth in this segment. C&M saw slower growth of 24% YoY during the quarter as the order book herein is lumpy; management suggested that underlying demand remains strong. Strong open order book at the end of FY21/22 suggest that revenue growth should remain strong further supported by traction in Gtropy business. We build in 40% CAGR growth during FY22-25E.

▪ Margins impacted due to scale up in IoT business/higher marketing expenses: EBITDA margin saw a sharp decline of 606bps QoQ/617 bps YoY to 40% mainly due to pick up in device led IoT/Gtropy business, which is margin dilutive in the first year, but which picks up from the next year due to higher SaaS revenue contribution. Margins were also impacted due to higher marketing spends (5% of sales) which more than doubled sequentially and also due to investment in new product development. Margins excluding Gtropy business was at 50%. We have lowered our EBITDA margins by 120bps in FY24E to factor in higher contribution from Gtropy business.

https://about.mappls.com/

Current Market Price - Rs.1240

Year High - 1542

Year Low - 984

Returns -

1 month - up 9%

6 months - 20%

1 year - minus 17%

Performance for last 1 year is lacklustre. Growth prospects appear bright. Niche player and good clientele. Long Term investors can buy on dips.

Date 5 July 2023

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