Leading the rally is Le Travenues Technology (Ixigo), which has surged 81%, buoyed by a 73% year-on-year (YoY) rise in revenue and 26% growth in profit after tax (PAT). The stock is a multibagger and has consistently delivered earnings and topline growth since its listing in June 2024. The momentum in Ixigo reflects growing investor confidence in travel-tech as demand for domestic and international travel remains strong.
Following closely is CarTrade Tech, which gained 45% in the same period. The company’s earnings recovery has been exceptional, with PAT jumping 105.5% YoY, driven by platform synergies post the integration of OLX India’s auto business. Revenue rose 22.3% YoY, signalling traction in both digital classifieds and auction segments.
Now trading at Rs 1,224, Its shares have spiked over 34% in the past three months.
The most widely tracked stock and now a Nifty constituent – Eternal’s rise has been quite fast paced since it first reported positive earnings of Rs 2 crore in the June quarter of 2023. In Q1, the PAT fell 90% YoY but was due to continued investments in quick commerce and going-out businesses. A 31% three-month return has helped the stock extend its rally to a staggering 391% in the past three years.
FSN E-Commerce Ventures, which operates Nykaa, has also joined the bandwagon with 30% returns in the same period. Backing its recent surge is the 72% YoY Q1 PAT jump, aided by higher order volumes in its beauty and fashion verticals. Meanwhile revenue grew 23%. The company’s consolidated GMV likely rose close to 30% in Q2, compared with mid-20s growth in preceding quarters so the Street expects a good show in the July-September quarter as well.Among other gainers, Infibeam Avenues rose 18%, supported by 71.8% revenue growth, while Swiggy advanced 12%, with both top line and bottom line improving. While Zomato’s arch rival’s profitability remains in the red, it has apprised investors of its expansion plan. While it faces stiff challenges in the quick commerce space, Swiggy’s benefits from the food delivery business duopoly.
Online travel boutique platform TBO Tek has seen a modest gain of 10% versus its above-mentioned peers, but this is market outperformance and better than 13 other stocks in the Nifty India Internet index. The company’ Q1 remained stable with 22.2% revenue growth and 3.4% PAT rise.
Anuj Gupta, Director at Ya Wealth Global Research highlights the gradual change in investors and analyst perception for new-age stocks from 2023. Many stocks including Eternal, PB Fintech and Paytm, have seen sharp rebounds from their all-time lows, he said.
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Well begun is half done
The new-age stocks are entering the earnings season on a strong footing with a rating upgrade by JM Financial. The internet segment has been moved to ‘Overweight’ from an earlier ‘Underweight’ stance. The trigger is the government’s GST rates rationalisation that most analysts are seeing as a big and timely impetus for the domestic consumption story.
Moreover, income tax cut earlier, followed by Reserve Bank of India’s (RBI) repo rate revision have been positive steps, noted JM FInancial.
Kranthi Bathini, Director-Equity Strategy at WealthMills Securities highlights how the perception about new-age stocks have been changing for the past many quarters. Citing examples of Eternal and Paytm, Bathini said that internet stocks have learned the hard way why profitability matters to investors and have improved on this metric. Backed by strong business models, many companies are now deftly doing a balancing act, he opined.
The Wealthmills expert also mentions Urban Company, a stock that was listed on September 17, to be making a lot of positive noise. He finds the business model niche and with growing urbansiation and digitalisation, platform companies are bound to benefit.
“Several companies are showing clearer signs of moving towards profitability. India has a large, young, digitally-savvy population driving rapid adoption of digital services. Stronger economic growth and rising consumer confidence are expected to boost GDP and private consumption, providing a favorable backdrop for internet companies,” Gupta said, echoing a similar sentiment.
Gupta also pointed to the trend of business diversification in marquee names like Eternal, Swiggy and Paytm. Many new-age companies are diversifying their business models and product portfolios. Companies like Eternal and Swiggy have expanded into quick-commerce and dining-out businesses while others are leveraging AI and deep tech to stay competitive, the Ya Wealth analyst said.
Q2 outlook
Nuvama Institutional Equities reiterates a healthy revenue growth for internet companies under its coverage.
“Eternal should lead in terms of revenue growth driven by sustained momentum in QC, while Info Edge, Nykaa and Eternal would log margin improvement. Staffing companies are likely to report moderate sequential growth in general staffing while the IT subcontracting business shall report stable growth,” this brokerage said.
JM in its Q2 earnings note has estimated a 47% YoY and 20% QoQ growth in net sales of internet companies. The Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) is pegged to soar 212% YoY and 109% QoQ.
JM’s coverage universe of 17 stocks has usual suspects while others like Affle, Zinka Logistics, Yatra Online and Route Mobile.
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Laggards in the pack
Brokerage Motilal Oswal Financial Services has traded flat in the past three months despite
19% sales jump in Q1 and 32% PAT uptick. With market regulator Sebi’s measures to curb speculative F&O trades, there has been a sentimental dent for investors who view these steps as a direct hit on brokerages’ revenues.
Brainbees Solutions which operates Firstcry brand has been an underperformer and trading below its issue price.
The three worst performers are Easy Trip Planners, Angel One and RattanIndia Enterprises, falling between 23% and 18%. All three reported hits in their toplines and bottomlines in Q1.
RattanIndia Enterprises is tech-focussed new-age company operating in e-commerce, electric vehicles, fintech and drones businesses.
Others like Nazara Technologies, Just Dial, IIFL Capital Services, Indian Railway Catering And Tourism Corporation (IRCTC), Indiamart Intermesh, Info Edge (India), PB Fintech (Policybazaar) and Thomas Cook (India) have declined up to 18%.
Stocks to buy
Nilesh Jain, Head Vice President, Equity Research Technical and Derivatives at Centrum Broking expects positive trends in the internet stocks to continue as the overall structure looks promising for further upside.
Selective names like Paytm, Nykaa, CarTrade, Swiggy, and Eternal appear attractive and can be accumulated from a medium-term investment perspective, Jain said, while recommending an ‘Avoid’ view on EaseMyTrip, Thomas Cook, JustDial, and Nazara. They lack a strong technical setup and may continue to underperform, so they are best avoided for now, he added.
Buy Nykaa | Support at Rs 230 and target Rs 300
Buy Paytm | Support at Rs 1,090 and target Rs 1,400
Buy Swiggy | Support at Rs 390 and upside at Rs 470
Buy CarTrade | Support at Rs 2,345 and target Rs 2,750
Buy Eternal | Support at Rs 320 and target Rs 400
Bathini has just one pick with a long term view in the form of Eternal.
Centrum Broking has a buy view on Info Edge, CE Info Systems and eMudhra for targets of Rs 1,644, Rs 1,994 and Rs 1,045 while ‘Neutral’ stance on Indiamart Intermesh and Nazara Technologies.
Gupta’s advice to investors is to track the earnings and sector-related developments of the companies, warning that the recent rally should not be seen as a risk-free rebound.
(Disclaimer: The recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times.)
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