ICICI Direct's research report on Matrimony.com
Strategy
Buy Matrimony.com in the range of Rs 580.00–605.00 for target price of Rs 698.00 with a stop loss of Rs 528.00. Time Frame: Six months.
Technical View
The IT sector has been one of the major out performers since March lows and technology driven platform businesses have outperformed. Structurally, shallow retracements and decisive larger rallies highlight robust price structure. The share price of Matrimony.com is at the cusp of generating a bullish Flag breakout. The entire breather of the last seven weeks has taken the shape of a bullish Flag formation as can be seen in the adjacent chart thus provides fresh entry opportunity to ride the next up move in the stock .The stock has already taken more than five weeks to retrace less than 50% of the previous four weeks up move (Rs 364-667). A shallow retracement signals a higher base formation. The low of the last seven weeks breather is placed around Rs 523, which is expected to act as major value area for the stock. We expect the stock to resume fresh up move after recent breather and head towards Rs 698 levels in coming months as it is the 123.6% external retracement of the recent breather (Rs 667-522) around Rs 690.
Fundamental View
Matrimony.com has pioneered the online matchmaking space through its flagship brand Bharat Matrimony.com. By adopting a micro market strategy, the brand offers a range of targeted and customized products and services that are tailored to meet the requirements of customers. With 15 regional and more than 300 community portals based on varied communities of the Indian origin, the company caters to the Indians all across the globe. Matrimony.com is the market leader in the Indian online matchmaking space boasting a total registration base of 39.82 mn profiles – since 2006 and an active profile base of 4.60 Mn as on 31st March 2020. The company also offers offline matchmaking services with a presence at more than 140 locations across several cities in the country for better customer reach and user accessibility. The underpinning positives of Matrimony.com are 1) market leadership (~60% market share) in an underpenetrated online matchmaking segment that accounts for ~24% of the overall matchmaking industry (online + offline), 2) substantial market share in south, east and west India leads to strong pricing power, 3) consistently maintained profitability compared to its rivals, which are making losses, 4) scope for further margin expansion led by cost rationalisation & revenue growth, 5) negative working capital, low capital intensity and strong cash generating characteristics of the business. In addition, the company being a market leader, will be a key beneficiary of the shift of consumers from offline to online led by rising adoption of smartphones, increase in internet penetration and social distancing. We like the company due to its leadership in an underpenetrated online match making industry, substantial market share in south, east and west region leads to strong pricing power and consistent profitability. In addition, the company’s focus on driving double digit revenue growth and potential in margin expansion bode well for it.
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