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CarTrade Tech

About the Company

CarTrade Tech Ltd is a multi-channel auto platform provider company with coverage and presence across vehicle types and Value-Added Services. The company operates various brands such as CarWale, CarTrade, Shriram Automall, BikeWale, CarTradeExchange, Adroit Auto, and AutoBiz. The platform connects new and used automobile customers, vehicle dealers, vehicle OEMs, and other businesses to buy and sell different types of vehicles. The company offers a variety of solutions across automotive transactions for buying, selling, marketing, financing, and other activities.

 

Q1FY23 Updates

Financial Results & Highlights

Standalone financials (in Crs)
  Q1FY23 Q1FY22 YoY % Q4FY22 QoQ % FY22 FY21 YoY%
Sales 34.8 22.37 55% 36.4 -4.4% 157 113 38.9%
PBT 1.6 -43.3 NA -34.1 NA -152 20 -860.0%
PAT 1.68 -44.3 NA -31.6 NA -146 79 -284.8%
Consolidated financials (in Crs)
  Q1FY23 Q1FY22 YoY % Q4FY22 QoQ % FY22 FY21 YoY%
Sales 92.7 63 47% 105.8 -12.4% 359 281 27.8%
PBT 3.8 -44.7 NA -21.4 NA -119 47 -353.2%
PAT 2.57 -45.4 NA -21.1 NA -132 91 -217.5%

 

Detailed Results:

  1. Consolidated Sales grew by 47% YoY while it declined 12.4% QoQ. 
  2. EBITDA margins: 13.4% | Adj EBITDA [excl ESOP]: 20%
  3. Avg monthly unique visitors (UV) per quarter stood at 31.1 million out of which 84.7% were organic.
  4. Total UV grew 14.7% YoY and 4.3% QoQ.
  5. The auction listing for the quarter stood at 272,275 an increase of 28% YoY, while the volume sold increased 92% to 57,710 units. [Lower Base in Q1FY21 due to 2nd Covid Wave]
  6. Conversion of listing to sold units: 21.2% [Calculated as  Auction Listing/Volume Sold]
  7. Remarketing Business [Shriram Automall] grew 52% to Rs.51 cr YoY and reported a positive PAT of Rs.2.8 cr.
  8. CarWale and Bikewale way above their competition on Google Search Trends in relative terms, demonstrates higher brand recall and helps in incoming traffic. 

 

Investor Conference Call Highlights:

  1. There is a little seasonality in the business with Q1 being lower than other quarters.
  2. Revenue Breakup – New Vehicle: 33% | Used Vehicle: 67%  [New vehicle business grew 48%]
  3. Dealer business grew 76% and contributed 40% to the Standalone [Consumer Group] revenue. 
  4.  abSure outlets stand at 57 across 34 cities. Management is heavily focussing on this segment and working with manufacturers, dealers and lenders to complete the customer journey from research to one-click purchase on their platform. These initiatives are driving the expenses higher. 
  5. Benefited from lower marketing spends of competition, resulting in better traffic and search trends on Google. 
  6. Working on the franchise model of abSure to ensure that the customer experience remain smooth inspite of them not owning the whole experience. Inventory is owned by franchise, moneyback guarantee, quality assurance product owned by CarTrade. Management believes this asset-light model will help them scale faster and provide better unit economics. 
  7. Expect semi-conductor-related supply chain issues to ease out over the next couple of quarters. [Impacts new vehicle segment]
  8. Expenses have only a small variable component, especially in the Remarketing segment. This leads to steeper operating leverage which cuts both ways and in case of lower revenue results in a sharper drop in margins. 
  9. Dealers are on a subscription model. Manufacturers’ revenue can be from fees to generate leads, ad revenue, conversion models and so on.  
  10. Targeting 100 abSure outlets and aim to sell 10-20 vehicles per month from each outlet. 
  11. Remarketing business expected commission range: Rs.7500 – 8000
  12. Supply from single users has higher margins compared to bigger suppliers. Offline has higher margins than online. Commercial vehicles have slightly higher margins. 
  13. ESOP expense range for the year: Rs.25-30cr.

 

Analyst’s View: 

CarTrade’s asset-light model can provide it an edge against its competitors who follow an asset-heavy model. While management believes that the asset-light franchisee model would generate superior unit economics with an ability to scale faster, it would be too soon to pin hopes on it when it has yet to significantly add to the top line. Apart from that, the competition in the segment is intense. Neither the consumer nor the dealers are sticky. Will CarTrade be able to take advantage while its competitors try to optimize their costs and face senior management exits remains to be seen?

 

Q4FY22 Updates

Financial Results & Highlights

Standalone financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 46 38 21.1% 42 9.5% 157 113 38.9%
PBT -34 11 -409.1% -37 -8.1% -152 20 -860.0%
PAT -32 10 -420.0% -29 10.3% -146 79 -284.8%
Consolidated financials (in Crs)
  Q4FY22 Q4FY21 YoY % Q3FY22 QoQ % FY22 FY21 YoY%
Sales 106 92 15.2% 102 3.9% 359 281 27.8%
PBT -21 19 -210.5% -22 -4.5% -119 47 -353.2%
PAT -21 16 -231.3% -18 16.7% -121 103 -217.5%

 

Detailed Results:

  1. Sales grew by 15% YoY on a consolidated basis with 4% rise QoQ.
  2. Adjusted EBIDTA margins for the quarter stood at 26%.
  3. AVG monthly unique visitors (UV) stood at 30 million out of which 84.2% were organic.
  4. The auction listing for the quarter stood at 3,23,693 while the number sold stood at 74,603.

 

Investor Conference Call Highlights:

  1. The manpower costs increased by 25% YoY due to a lower base in the previous year due to Covid.
  2. The management states that the company’s marketing expenses are relatively lower than its competitors due to higher brand affinity & the ability to generate 30 Million new traffic out of which 84% is organic, leading to lower requirements for spending.
  3.  The management believes the presence of physical infrastructure due to its SAMIL biz segment provides it with a clear differentiation Vs its competitors.
  4. The management believes that the simplification of GST rules for the used car market will help fuel the industry’s growth in the coming time.
  5. The company’s volumes have grown at a higher pace vis-a-vis the revenue due to higher contribution from the non-physical segment due to Covid where commissions are comparatively lower.
  6. The company’s abSure biz is a franchisee model where the company is expected to incur higher costs initially, but the management is very bullish about its growth prospects in the long run.
  7. The management believes that without increasing traffic it could rapidly grow its revenues if manufacturers give more budgets to go up on digital advertising.
  8. The management states that 14% of the OEM spends are digital which amounts to about Rs.850 Cr out of which the company gets a pie of close to Rs.120 Cr.

 

Analyst’s View: 

CarTrade Tech is one of the biggest auto platform providers in India and the only profitable one to date. The company had a good IPO post which it saw a serious fall in its share price of over 60%. The overall revenue growth has been decent in Q4 with revenues growing 15% YoY. The profits for Q4 and FY22 remain subdued due to a non-cash exceptional item regarding ESOPs issued by the company in 2022. The company has a lot of plans in place for the expansion of its new business segments like the abSure outlets and the fintech loan platform. It has also earmarked Rs 750 Cr for investments in growing new businesses. SAMIL has also added Ashok Leyland to its institutional auto auction business and expects to add more OEMs in the future. It remains to be seen what obstacles the company will face in its expansion into new business segments and how will the whole online vehicle ecosystem develop in the future. Given the brand strength of the company and its status as the only profitable player in this rising segment, CarTrade Tech is a pivotal auto platform stock to watch out for, particularly considering its currently attractive valuation levels.

 

Q3FY22 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY22 Q3FY21 YoY % Q2FY22 QoQ % 9MFY22 9MFY21 YoY%
Sales 42 37 13.5% 39 7.7% 110 75 46.7%
PBT -37 13 -384.6% -37 0.0% -118 9 -1411.1%
PAT -29 11 -363.6% -40 -27.5% -114 69 -265.2%
Consolidated Financials (In Crs)
Q3FY22 Q3FY21 YoY % Q2FY22 QoQ % 9MFY22 9MFY21 YoY%
Sales 102 86 18.6% 88 15.9% 253 189 33.9%
PBT -22 27 -181.5% -30 -26.7% -98 27 -463.0%
PAT -18 24 -175.0% -35 -48.6% -100 87 -214.9%

Detailed Results:

  1. Sales grew by 18% YoY on a consolidated basis with 16% rise QoQ.
  2. Adjusted EBIDTA margins for the quarter stood at 32% up 400 Bps on quarterly basis.
  3. AVG monthly unique visitors (UV) stood at 31.2 million out of which 86.2% were organic.
  4. UVs increased by 1% YoY & decreased by 9% QoQ.
  5. Auction listing for the quarter stood at 3,26,319 while the number sold stood at 72,639.
  6. The company is geared to scale at 200 outlets in the next 2 years.

Investor Conference Call Highlights:

  1. The overall car market was down 15% YoY in Q3.
  2. 9M revenues grew 33% YoY while adjusted EBITDA grew 30% YoY.
  3. The average monthly visitors to the company’s sites were at 31 million of which 86% came in organically.
  4. There was an exceptional non-cash adjustment of Rs 140 Cr in Q3 for ESOPs granted in April 2021.
  5. The consumer business of CarWale, CarTrade, and BikeWale grew 47% YoY while adjusted EBITDA grew 56% YoY in these segments.
  6. Among the new businesses that the company is looking to launch, the B2C used car franchising is expected to do well. The company has also created a fintech product where customers can get linked to various auto financiers with approval from Cartrade once the customer puts in the requisite data.
  7. The Board has earmarked Rs 750 Cr for investment into businesses like car servicing, car repair, car financing, electric vehicles and other avenues.
  8. Cartrade is aiming to digitize the entire journey of acquiring a new or used vehicle.
  9. The company is also aiming to enhance the online used car buying experience with its CarWale certified or CarWale abSure outlets. Currently 22 outlets are certified abSure. The company aims to bring this number up to 200 in the next 2 years.
  10. In Q3, the company tied up with Ashok Leyland for auctioning the exchange vehicles brought to Ashok Leyland dealerships. The company also has such ties with Bharat Benz.
  11. Despite the slowdown in the Indian auto sector, investments in online promotion and advertising have gone up and the management expects this to continue going up. There is still room for expansion for digital advertising in the auto space in India which is currently at only 13-14% of total ad spend vs 40% globally.
  12. The company includes other income in its EBITDA calculations according to the management.
  13. The realization per vehicle for SAMIL has fallen but the management remains confident that of it given that it is still yielding an adjusted EBITDA margin of 35%.
  14. The abSure division has a separate CEO and the company is very bullish on developing this business. The main model of monetization here is transaction of sales of vehicles from the franchise stores where Cartrade charges a take rate on the selling price. The company’s cut on the final sales price ranges from 1.5% to 3% depending on the services provided to the specific dealer.
  15. The management said that Cartrade has already done tens of thousands of loan approvals through its fintech product already and is one of the largest approvers of loans in this segment in the industry.
  16. The management reiterates the company’s target to maintain a 30 30 30 model with growth target of 25-30%, margin of close to 30% and profit growth of 30%.

Analyst’s View:

CarTrade Tech is one of the biggest auto platform providers in India and the only profitable one till date. The company had a good IPO post which it saw a serious fall in its share price of over 60%. The overall revenue growth has been decent in Q3 with revenues growing 19% YoY and the classified businesses of Carwale, Bikewale and CarTrade growing 47% YoY. The profits for Q3 and 9M remains subdued due to a non-cash exceptional item of Rs 140 Cr regarding ESOPs issued by the company in 2021. The company has a lot of plans in place for the expansion of its new business segments like the abSure outlets and the fintech loan platform. It has also earmarked Rs 750 Cr for investments in growing new businesses. SAMIL has also added Ashok Leyland to its institutional auto auction business and expects to add more OEMs in the future. It remains to be seen what obstacles the company will face in its expansion into new business segments and how will the whole online vehicle ecosystem develop in the future. Given the brand strength of the company and its status as the only profitable player in this rising segment, CarTrade Tech is a pivotal auto platform stock to watch out for, particularly considering its currently attractive valuation levels.

 

 

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