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One of the worst performing IPOs is an outperformer in the recent market volatility
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
Most analysts who have coverage on CarTrade Tech have a buy rating on the stock but targets are below its IPO price.
Shares of CarTrade Technologies Ltd. have gained 21% in the last four trading sessions, in what has been an otherwise volatile market. During the same period, the Nifty Midcap index is down nearly 2.5%, while the Smallcap index is down nearly 3%.
With this surge, the stock has turned positive for 2024. Over the last 12 months, shares of the company have doubled. The stock had declined to an all-time low of ₹406 in May last year before rebounding.
However, despite this outperformance, the stock is among the worst-performing IPOs since the pandemic and a destroyer of investor wealth. The stock still remains 47% below its IPO price of ₹1,618.
CarTrade Tech shares were listed on the bourses in August 2021. The company operates an online marketplace for the exchange of used cars.
For the March quarter, CarTrade Technologies reported its highest-ever revenue of ₹161 crore, which was a growth of 38% from the year-ago period. Net profit also increased by 43% year-on-year to ₹25 crore.
The company also received its highest-ever average monthly unique visitors for the quarter at 70 million, and more than 92% of that traffic was organic.
“The acquisition of OLX India during this period has not only strengthened our leadership position but also paved the way for substantial synergies among OLX India, CarWale, BikeWale and Shriram Automall,” CarTrade’s Chairman and Founder Vinay Sanghi was quoted as saying.
Brokerage firm Nomura retained its ‘buy’ rating on the stock with a price target of ₹982. The brokerage said that the company’s margin improvement remains on track and expects free cash flow to improve sharply to ₹240 crore by financial year 2026, implying a free cash flow yield of 6%, which according to the brokerage is attractive.
JM Financial calls the risk-reward for CarTrade Tech favourable with three deeply moated and highly profitable business segments. It believes the company is perfectly positioned to benefit from the rising digitalisation in Indian auto. It also maintained its ‘buy’ recommendation on the stock with a price target of ₹1,020.
However, Kotak Institutional Equities has a ‘sell’ rating on CarTrade Technologies, with a price target of ₹530. It is the only brokerage to have a ‘sell’ rating on the stock among the six who have coverage. The remaining five have a ‘buy’ rating. However, none of them have a 12-month price target above the company’s IPO price. The 12-month consensus price target implies a potential upside of 6% from current levels.
On the charts, the stock has entered the overbought territory with its Relative Strength Index (RSI) now at 74. An RSI reading above 70 indicates that the stock is in overbought territory.
Shares of CarTrade Technologies ended 5% higher on Tuesday at ₹849.95. The stock also witnessed a block deal on Tuesday, where Sector Global Emerging Markets Fund acquired over 2.4 lakh shares at an average price of ₹854.93.
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