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Matrimony.com Ltd>
  • CMP : 574.3 Chg : -46.05 (-7.42%)
  • Target : 640.0 (10.34%)
  • Target Period : 12 Month

10 May 2023

Guiding for flat marketing expenses in FY24; margins likely to see revival…

About The Stock

Matrimony.com (Matrimony) is one of the leading providers of online matchmaking services. The company also provides post marriage services.

  • Apart from a common website, the company operates ~300 community matrimony sites and 15 regional matrimony sites
  • Net debt free and only profitable player among its peers
Q4FY23 Results:

Matrimony reported revenue recovery in Q4FY23.

  • Matchmaking services revenue grew 2.3% YoY; paid subscribers grew 11.8% YoY while ATV declined 6.9% YoY
  • Matchmaking EBITDA margins declined 160 bps YoY while they were up 330 bps QoQ
  • Marketing expenses were up 0.8% QoQ, 7.8% YoY
What should Investors do?

Matrimony’s share price has dipped over the past five years (from ~₹ 833 in May 2018 to ~₹ 580 levels in May 2023).

  • We change our rating on the stock from REDUCE to HOLD
Target Price and Valuation

We value Matrimony at ₹ 640 i.e. 19x P/E FY25E EPS.

Key Triggers for future price performance
  • Market leadership in an underpenetrated online matchmaking segment
  • Transition to online from offline, healthy subscriber addition, increased penetration in north, introduction of new products and inorganic opportunity key revenue drivers (10.5% CAGR over FY23-25E)
  • Higher conversion rate (paid vs. total profiles)
Alternate Stock Ideas

Apart from Matrimony, in our IT coverage we also like Affle.

  • Key beneficiary of advertising shift to digital medium and healthy growth in converted users
  • BUY with a target price of ₹ 1,255

Key Financial Summary

Particulars FY20 FY21 FY22 FY23 5 year CAGR (FY18-23) FY24E FY25E 2 year CAGR (FY23-25E)
Net Sales 371.8 377.9 434.5 455.8 6.3 500.0 556.2 10.5
EBITDA 54.5 67.5 87.0 67.4 -2.8 84.7 109.5 27.4
EBITDA Margins (%) 14.7 17.9 20.0 14.8 - 16.9 19.7 -
Net Profit 29.5 40.8 53.6 46.7 -11.6 56.8 75.6 27.3
EPS (|) 13.0 17.8 23.4 20.7 - 25.2 33.6 -
P/E 44.6 32.4 24.8 28.0 - 23.0 17.3 -
RoNW (%) 12.9 15.5 17.3 18.4 - 19.0 20.8 -
RoCE (%) 16.2 19.0 21.2 20.2 - 21.1 23.0 -
Source: Company, ICICI Direct Research

Key takeaways of recent quarter & conference call highlights

  • The company, on a consolidated basis, reported revenue of | 114.5 crore, up 3.6% QoQ, 3.7% YoY. Revenue growth was aided by a recovery in matchmaking revenue. Matchmaking revenue increased 3.5% QoQ to | 111.6 crore. Billings in match making services increased 8.6% QoQ to | 117.6 crore
  • The company during the quarter added 2.6 lakhs paid subscribers, up 9.9% QoQ & 11.8% YoY. ATV of the company declined to | 4,488, down 1% QoQ as pricing pressure continues
  • In marriage services segment, the company reported revenue of | 2.9 crore, up 10.7% QoQ. On the margins front, it reported an EBITDA loss of | 3.2 crore. Billings in match making services grew 5.9% QoQ to | 3.3 crore
  • On the margins front, the company in match making services segment reported an EBITDA of | 23.6 crore with a corresponding EBITDA margin of 21.1%. On a consolidated basis, EBITDA margin improved 330 bps QoQ to 14.6% in Q4 and in absolute terms the company reported an EBITDA of
    | 16.7 crore. The company during the quarter spent | 46.5 crore, up 0.8% QoQ on advertisement & marketing expenses
  • Matrimony, for FY23, reported revenue of | 455.8 crore, up 4.9% with matchmaking services contributing | 446 crore, up 3.6% to revenue. The company, during the year, added 9.9 lakhs paid subscribers while ATV came in at | 4,493, down 6.5%. Marriage services segment reported revenues of | 9.7 crore in FY23 compared to | 4.1 crore in FY22. The company at the consolidated level reported EBITDA margin of 14.8%, down 520 bps in FY23 mainly due to muted growth in matchmaking services and elevated marketing spends during the year. The company, in FY23 spent | 182.5 crore, on marketing
  • Matrimony mentioned that post Covid it faced challenges as conversions were not at the expected levels, which ultimately impacted the growth of the company. The company is now guiding double digit revenue growth in FY24 to be aided by continued strong growth in paid subscription as it is being driven by competitive pricing. The company added that it is planning to keep prices at the current levels and not planning any increase in the near term. Hence, growth is likely to continue in FY25 as far as paid subs is concerned. The company is likely to continue strong revenue growth momentum on healthy billings in FY24
  • The company mentioned that its marketing spends in FY23 remained elevated due to intense competitive intensity in the market. Matrimony added that since it was the market leader it had to spend higher to defend its market position. The company, however, said the intensity is easing a bit. Hence, it expects the marketing spends in FY24 to be at level similar to FY23. The company also mentioned that marketing expenses in Q4 are lower due to seasonality as it normally keeps these expenses down during IPL cricket season and also mentioned that there could be quarterly variation in this spend. Matrimony also added that funding issues at the start ups does not have a direct correlation with its lower marketing spend
  • The company also mentioned that marketing spend is also a reflection of competitive standing. Matrimony added that it has increased its market share in the last year along with No. 2 player. Now, since top two players control more market than a year ago, marketing expenses are expected to be prudent
  • The company expects its PAT margin to increase ~300 bps in Q1FY24 aided by revenue growth & steady marketing spends during the quarter. Matrimony mentioned that margin expansion is factoring in wages hikes in range of 6-7% in Q1
  • In marriage services, the company mentioned that it has integrated mandap.com on its wedding bazaar platform. Matrimony also added that it aiming to become break even in marriage services segment in FY24. The company mentioned it is focusing on more profitability in this business, going forward
  • In the new initiatives the company mentioned that Jodi is doing well. It is still working on a strategy to grow this business. The company also mentioned that to drive its growth in Jodi, it is has launched a campaign wherein women can access premium features for free. In Elite matrimony the company has launched success fee-based matchmaking wherein the customer avails services for minimal service charge
  • The company mentioned that its associate company Astro Vision Futuretech Pvt Ltd (Astro) has grown in double digits in FY23. It expects the revenue growth to continue in FY24 driven by launch of new lines of business. The company also mentioned that Astro has become profitable in Q4FY23
  • The company mentioned that the tax rate for FY23 came in at 16.6% and added that tax rate during the year was lower due to the lower realisations on mutual funds for funding the buyback conducted during the year. Matrimony added that it is currently not looking at any M&A opportunity. The company for FY23 declared a final dividend of | 5 per share

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