CarTrade Tech: The possible reason of stock’s underperformance
Here, we are trying to understand the company’s business and what exactly it does. It has many platforms or brands under which this works, CarWale, BikeWale, CarTrade, Shriram Automall, CarTradeExchange, Adroit Auto and AutoBiz.
CarTrade tech, which was listed in August 2021 at 1,600 per share at a discount to the issue price but since then there has been a one-way decline in the stock price. Something that we saw with all new-age companies. The stock has become one-third since the time it was listed.
Here, we are trying to understand the company’s business and what exactly it does. If you want to sell or buy a car sitting at home or sell an old vehicle, the company helps. It is a Digital automotive platform or an aggregator that facilitates buying/selling of new and old vehicles between customers, OEMs, dealers, banks, insurance companies and other stakeholders.
It has many platforms or brands under which this works, CarWale, BikeWale, CarTrade, Shriram Automall, CarTradeExchange, Adroit Auto and AutoBiz. CarWale, BikeWale and CarTrade are used by potential car/bike buyers to research and compare a wide range of available options and also to connect with dealers, OEMs and other partners. How do they earn money here?
Company Monetises these platforms by paid advertisements and marketing campaigns. These campaigns are from OEMs, dealers, banks, insurance companies and other financial institutions.
Shriram auto mall or SAMIL which the company acquired in 2018 and CarTradeExchange are platforms where co-facilitate sales of pre-owned vehicles and here it earns commission and fees from the auction and remarketing services. Lastly, it provides ancillary services such as valuation, inspection and registration via Adroit Auto.
In terms of financials for the company, revenues have been between 250-300 crores, on a 9M basis its averaging around 370 crores. These new-age companies have been reporting adjusted EBITDA margins, which many long-term investors stay wary of. For this co, the adjusted margin has been 28 percent for the last 2-3 years.
Now when it comes to profits, it made 103 crores in FY21 and then a massive loss and in 9M back to profits of 23 crores. Q3 and Q4 are usually stronger quarters for the company and also a positive is that it is debt free with a cash balance of close to 1000 crores.
There are some metrics to understand the operations of the company.
Number of unique visitors
The number of visitors on the website and how many of them convert to a customer is important to track. From levels of 27.1 million unique customers in Q1FY22, then going upto 30 million in Q4. Company in the last quarter saw unique visitors of 35.4 million. and that looks like the sustainable range. Out of these organic unique visitors were 87.6 percent, the rest is from paid sources.
abSure
In terms of possible triggers or important factors, co-launched abSure to sell cars via a franchisee network for used cars. It has 57 outlets at 34 locations where the company takes 60 days to buy a vehicle, refurbish and sell it. It is right now a small part of revenues, but analysts have been bullish on it because they expect future revenue growth for business to be driven by faster growth for abSure. However, company in Q3 said it will take another quarter or two quarters to focus on revenues and margins for abSure.
Shriram Automall
The second is Shriram automall or SAMIL which is an acquisition and a captive B2B auction platform. This is for the repossessed inventory of Shriram Transport which is then auctioned on its platform. Auction volumes up 9 percent YoY in 9MFY23 but volumes were weak in Q3, and this is another important segment to track.
Not growing profitably has been a big worry for investors when it comes to new-age companies, that’s the bigger worry. For cartrade, they are unable to break into Maruti which accounts for near 43 percent of cars sold in India in FY22. So, this will be an important account. Additionally, while analysts are bullish on abSure this is not gaining so much market share.
In terms of valuations, the price to sales is at 1.3X vs 4X at the time of listing. That’s the kind of price damage we have seen for the stock.
Interestingly, promoters do not hold any stake in the company and some big names are a part of the shareholding. Mutual funds at 3.21 percent, alternate investment funds at 2.12 percent, FDIs at 51.92 percent and FPI category at 20.55 percent.
CarTrade Tech has also launched CarTrade Ventures which plans to invest up to Rs 750 crore over 5-7 years to acquire and invest in companies in the automotive space to enter a new segment or bring new products and technologies to customers.
(Edited by : Sangam Singh)
First Published: Feb 24, 2023 10:10 AM IST
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