Global brokerage UBS intiated 'buy' coverage on CarTrade Tech, citing higher margins and top-line growth. In its recent note, the brokerage has set a target price of Rs 4,000 on CarTrade Tech shares, marking an upside of 42.3% from its previous closing price Rs 2,809.9.
Why UBS is bullish on CarTrade?
According to UBS, CarTrade's is likely to deliver a strong earnings growth, estimating a 15-20% upside, while its asset light model offers significant operating leverage. It expects margins to expand from 33% in FY26 (9% in FY23) to 47% by FY30, which is likely to be driven by significant top-line growth.
At present, the revenue generated by the company across its platforms reprsents only 3-4% of total addressable market. A largely fixed cost base enables high incremental EBITDA conversion and significant margin expansion headroom to global peer levels. The strength of the company's platforms is highlighted in 95% organic traffic, despite spending only 4% of revenue on marketing against 4-10% spent by global peers and much more by other Indian platforms, UBS said.
The brokerage also highlighted the growth potential CarTrade's leading consumer-to-consumer (C2C) platform OLX India,which remains underappreciated, with an organic base of 180 million users.
Meanwhile, UBS noted that the concerns about AI disruption have not imapcted on operating metrics so far. The commentary by global peers indicates AI has so far had a minimal impact on core business metrics. In fact, many players globally have seen stable or rising traffic, suggesting AI is acting more as an enabler than a disruptor. While we do acknowledge the impact of AI on top-of the-funnel discovery, the real monetisation scope remains in the lower layers where these platforms continue to dominate.
Notably, CarTrade Tech shares have been volatile today as the benchmark indices remained in red due to US-Iran tensions.
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