Stocks to buy: JM Financial upgrades IndiaMART InterMESH to ‘Buy’ after 22% stock correction

Stocks to buy: After falling about 22 percent over the past four months, brokerage JM Financial upgraded its rating IndiaMART InterMESHShare rating from “Sell” to “Buy”.

The firm said this downgrade was the result of a sharp slowdown in fee growth in the second quarter of 2025 and muted increases in paying providers over the past six quarters. While no significant improvement in key metrics is expected in the third quarter of fiscal 2025, JM Financial expects stand-alone collections to grow in the younger teens over the medium term, compared to 5 percent annualized growth in the second quarter. In addition, the consolidated EBITDA margin is expected to remain strong at 34-36 percent due to limited investments in growth.

The firm highlighted that INMART is currently trading at 28x NTM PER (excluding cash and other earnings), representing a 50 percent discount to its five-year average of 56x. With a free cash flow yield (including other income) of more than 6 percent in FY26 estimates, JM Financial believes that the downside risk for stock limited The brokerage revised its target price for March 2026 to ₹2450.

Muted growth is expected in the third quarter of FY25

JM Financial highlighted that growth in INMART’s solvent suppliers has been slow since Q1 2024 and this trend is unlikely to improve in Q3 2025 due to unfavorable seasonality and continued high outflows in the silver category. The firm estimated a net increase of 1,800 paying vendors in its core ads business during the quarter, well below the historical average of 4,500. This high outflow is expected to impact companies a funnel of increased sales resulting in a minimal increase in the average fee per paying supplier.

For the third quarter of fiscal year 2025, JM Financial forecasts fee growth of a modest 6 percent year-over-year, only slightly better than the 5 percent growth in the previous quarter. However, revenue growth could increase to 15.5 percent year-on-year due to forward-looking earnings, although that would still slow compared to previous fiscal years. On the plus side, cost savings from reduced sales incentives and service costs could boost EBITDA margins by about eight percentage points year-over-year, and consolidated EBITDA is forecast to grow 50 percent during the quarter.

Medium-term growth to stabilize teenagers

JM Financial said growth in INMART’s core ad business will be in the mid-teens, compared to its historical CAGR of more than 20 percent. The firm’s analysis showed that the shockingly low 5 percent year-over-year growth in standalone collections in Q2 2025 likely stemmed from sales execution issues that could be resolved over the next two to three quarters.

If INMART manages to add 2,500-3,000 solvent suppliers per quarter in FY26, it could achieve mid-single digit growth in this metric. In addition, sales figures may increase due to the stabilization of the outflow of silver suppliers and periodic price increases in the platinum category. JM Financial expressed confidence in INMART’s ability to recover to a mid-teens collection level in FY26, supported by these medium-term factors.

Upgraded to Buy on favorable risk-reward dynamics

According to JM Financial, the recent correction in INMART shares presents a favorable risk-reward scenario. Trading at 28x NTM PER (excluding cash and other earnings) and a free cash flow yield of over 6 percent for FY26, the stock looks attractively valued. The brokerage raised its FY25-27 EPS estimates by 2-5 percent on higher margins, while maintaining its profit guidance.

Effective March 2026, JM Financial has set a revised target price based on DCF ₹2450, underlining the bullish outlook for the stock.

Disclaimer: The above views and recommendations are those of individual analysts or brokerage firms and not of Mint. We advise investors to consult with certified experts before making any investment decisions.