Initiating Coverage | Internet Software & Services

April 20, 2018

Matrimony.com Ltd

BUY

A complete package from matchmaking to wedding

CMP

`781

Target Price

`984

Incorporated in 2001, Matrimony.com Ltd (MCL) is engaged in providing

Investment Period

12 Month

online matchmaking and marriage services through internet and mobile

platforms in India and internationally. Currently, MCL has a database

comprising of 3.3 million active profiles (as of December 31, 2017) and 140

Stock Info

retail centers distributed across India. Its flagship brand, BharatMatrimony,

Sector

Internet Software & Services

has 15 language based domains under its umbrella.

Market Cap (` cr)

1,774

Net Debt (` cr)

Huge untapped market opportunity: Unmarried population in CY2016 was

Beta

0.3

107mn, out of which active seekers were 63mn. However, active users of the

52 Week High / Low

1025/703

Avg. Daily Volume

251

online matrimony segment were only 6mn in CY2016, according to KPMG

Face Value (`)

report. Currently, MCL has 3.08mn active profiles on Matrimony.com. Hence,

BSE Sensex

34,427

N ifty

10,565

there is a huge untapped market opportunity for the company.

Reuters Code

Leading provider of online matchmaking services in India: According to the

Bloomberg Code

MATRIM IN

comScore Report for June 2017, Matrimony.com is the leader for online

matchmaking services in India in terms of the average number of website

Shareholding Pattern (%)

Prom oters

50.6

pages viewed by unique visitors, time spent and total pages viewed mainly

MF / Banks / Indian Fls

24.1

due to the company’s large database of profiles.

FII / NRIs / OCBs

22.4

Indian Public / Others

2.9

Strong consumer brand recall: Matrimony.com has high degree of brand

recall and trust in India, as evidenced by the average number of website

Abs.(%)

1yr

3yr

pages viewed by unique visitors in June

2017 (comScore Report).

Sensex

(3.1)

17.4

23.5

BharatMatrimony.com has been ranked as India’s most trusted online

MCL

(13.7)

matrimony brand by The Brand Trust Report India Study 2014. MCL spends

17-18% (% of sales) on ad spends every year.

3-year price chart

Foray into marriage services: MCL’s key strategy for driving monetization is to

increase the length of relationship with customers and increase the amount of

1000

revenue earned from customers by offering additional wedding related

950

services such as photography & videography, wedding apparel, venue, stage

900

decorations, make-up, catering and honeymoon packages from various

850

vendors to meet customers’ wedding needs.

800

Outlook & Valuation: We expect MCL to report net revenue CAGR of ~15%

750

~`450cr over FY2018-20E mainly due to strong growth in online

700

matchmaking and marriage related services coupled by its strong brand

recall and large user database. On the bottom-line front, we expect CAGR of

~28% to `82cr over the same period on the back of margin improvement

Source: Company, Angel Research

(due to strong operating leverage & reduction in losses of marriage service

business). We initiate coverage on the stock with a Buy recommendation and

target price of `984 based on 27x FY20E EPS, indicating an upside of ~26%

from the current levels.

Key financials

Y/E March (` cr)

FY2017

FY2018E

FY2019E

FY2020E

Amarjeet S Maurya

Net sales

293

337

389

450

022-39357800 Ext: 6831

% chg

14.9

15.2

15.3

15.6

[email protected]

Net profit

% chg

3.6

37.2

20.3

EBITDA margin (%)

18.7

23.0

24.6

25.3

EPS (`)

21.3

22.1

30.3

36.4

P/E (x)

36.7

35.4

25.8

21.4

P/BV (x)

11.9

8.1

5.9

RoE (%)

33.5

31.5

27.5

RoCE (%)

330.8

44.7

38.6

33.6

EV/Sales (x)

6.0

4.7

4.0

3.3

EV/EBITDA (x)

32.0

20.6

16.4

13.1

Source: Company, Angel Research, Note: CMP as of April 19, 2018

Please refer to important disclosures at the end of this report

Matrimony.com Ltd| Initiating Coverage

Leading provider of online matchmaking services in India

According to the comScore Report for June 2017, Matrimony.com is the leader for

online matchmaking services in India in terms of the average number of website

pages viewed by unique visitors (Matrimony.com

9,91,000, Shaadi.com

4,20,000, Jeevansathi.com-3,48,000), time spend (Matrimony.com - 149mn

minutes, Shaadi.com - 26mn minutes mn, Jeevansathi.com - 33mn minutes) and

total pages viewed (Matrimony.com

459mn, Shaadi.com

46mn,

Jeevansathi.com -48mn) mainly due to the company’s large database of profiles.

Exhibit 2: Matrimony.com has strong online visibility

Source: Company, Angel Research

Foray into marriage services

Marriage Services Industry is estimated to be `3,681bn offering an opportunity for

an organized player like Matrimony.com Ltd. to cater to this fragmented market.

MCL’s key strategy for driving monetization is to increase the length of relationship

with customers and increase the amount of revenue earned from customers. It has

extended its matchmaking services by offering additional marriage services to the

existing online matchmaking user base like photography & videography, wedding

apparel, venue, stage decorations, make-up, catering and honeymoon packages

from various vendors to meet customers’ wedding needs.

Exhibit 3: Estimated % spends on marriage services

Exhibit 4: Marriage related services picking-up

Catering

17.5

Decoration

Venue

3%3%2%

Honeymoon

24%

12.1

Entertainment

10.8

Accomodation

Wedding Planner

7.4

16%

Gifts

5.1

12%

Photography

Bridal Make-up

Local Transportation

Invitation Cards

FY2014

FY2015

FY2016

FY2017

9MFY18

Source: Company, Angel Research

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Outlook and Valuation

We expect MCL to report net revenue CAGR of ~15% to ~`450cr over FY2018-

20E mainly due to strong growth in core online matchmaking services coupled with

its strong brand recall and large user database. Further, MCL has also started

other marriage related services which will boost the additional revenues of the

company. On the bottom-line front, we expect a CAGR of ~28% to `82cr over the

same period on the back of margin improvement (due to strong operating

leverage & reduction in losses of marriage service business). At the current market

price of `781, the stock trades at PE of 21.4x its FY2020E EPS of `36.4. We initiate

coverage on the stock with a Buy recommendation and target price of `984 based

on 27x FY20E EPS, indicating an upside of ~26% from the current levels.

Downside risks to our estimates

 Any increase in competition from online and offline companies could

impact the MCL’s earnings.

 If MCL is unable to keep pace with changing technology, evolving industry

standards and does not develop new products for business, its profitability

could be impacted.

 The company is dependent on telecommunications and information

technology systems, networks and infrastructure to operate its business.

Any interruption or breakdown in such systems, networks or infrastructure

or its technical systems could impair MCL’s products and services.

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Company Background

Incorporated in

2001, Matrimony.com is engaged in providing online

matchmaking and marriage services. They offer their services through Internet and

mobile platforms in India and internationally.

MCL is one of the first companies to provide online matchmaking services in India,

having database comprising of 3.08 million active profiles (being profiles that

have been published or logged in at least once during the prior 180 day period).

They offer a range of targeted and customized products and services that are

tailored to meet the specific requirements of customers based on their religious or

caste preferences or other criteria such as marital status and age bracket.

Currently, they have 140 retail centers distributed across India where customers

can walk in and register on their websites. Its flagship brand, BharatMatrimony,

has 15 language based domains under its umbrella. They also have other portals

EliteMatrimony,

CommunityMatrimony,

MatrimonyDirectory,

MatrimonyPhotography,

MatrimonyBazaar,

MatrimonyDirectory

and

MatrimonyMandaps.

Exhibit 6: Revenue - break up for 9MFY2018

5.3%

94.7%

Match making services

Marriage services

Source: Company, Angel Research

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Consolidated Profit & Loss Statement

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

FY2020E

Total operating income

255

293

337

389

450

% chg

5.6

14.9

15.2

15.3

15.6

Total Expenditure

322

238

260

293

336

Employee

125

117

128

148

171

Selling & Administrative Expenses

Others Expenses

143

100

EBITDA

(67)

114

% chg

41.9

23.3

18.9

(% of Net Sales)

(26.4)

18.7

23.0

24.6

25.3

Depreciation& Amortisation

EBIT

(77)

101

% chg

52.0

25.5

20.0

(% of Net Sales)

(30.2)

15.1

20.0

21.7

22.6

Interest & other Charges

Other Income

(% of PBT)

(6.4)

8.9

16.6

2.3

1.9

Share in profit of Associates

Recurring PBT

(75)

103

% chg

79.0

9.2

20.3

Tax

(% of PBT)

0.0

20.0

PAT (reported)

(75)

Minority Interest (after tax)

Profit/Loss of Associate Company

Extraordinary Items

(74)

(4)

ADJ. PAT

(1)

% chg

3.6

37.2

20.3

(% of Net Sales)

(0.5)

16.4

14.8

17.6

18.3

Basic & Fully Diluted EPS (`)

(0.6)

21.3

22.1

30.3

36.4

% chg

3.6

37.2

20.3

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Consolidated Balance Sheet

Y/E March (` cr)

FY2016

FY2017

FY2018E

FY2019E

FY2020E

SOURCES OF FUNDS

Equity Share Capital

Reserves& Surplus

(85)

(42)

137

206

288

Shareholders Funds

(76)

(31)

149

217

300

Minority Interest

Total Loans

Deferred Tax Liability

Total Liabilities

(5)

153

221

304

APPLICATION OF FUNDS

Gross Block

Less: Acc. Depreciation

Net Block

Capital Work-in-Progress

Investments

Current Assets

263

311

412

Inventories

Sundry Debtors

Cash

169

195

273

Loans & Advances

Other Assets

Current liabilities

128

104

134

146

162

Net Current Assets

(33)

(9)

129

166

250

Deferred Tax Asset

Mis. Exp. not written off

Total Assets

(5)

153

221

304

Source: Company, Angel Research

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Consolidated Cashflow Statement

Y/E March (` cr)

FY2016

FY2017

FY2018E FY2019E FY2020E

Profit before tax

(1)

103

Depreciation

Change in Working Capital

(9)

(27)

(11)

(7)

Interest / Dividend (Net)

(1)

Direct taxes paid

(1)

(2)

(16)

(17)

(21)

Others

(27)

(34)

Cash Flow from Operations

(8)

(Inc.)/ Dec. in Fixed Assets

(10)

(43)

(10)

(Inc.)/ Dec. in Investments

Cash Flow from Investing

(10)

(43)

(10)

Issue of Equity

130

Inc./(Dec.) in loans

(43)

Dividend Paid (Incl. Tax)

Interest / Dividend (Net)

(3)

(9)

Cash Flow from Financing

(8)

103

Inc./(Dec.) in Cash

139

Opening Cash balances

169

195

Closing Cash balances

169

195

273

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Key ratios

Valuation Ratio (x)

FY2016

FY2017

FY2018E FY2019E FY2020E

P/E (on FDEPS)

36.7

35.4

25.8

21.4

P/CEPS

32.6

24.2

22.2

18.6

P/BV

(56.7)

11.9

8.1

5.9

EV/Sales

6.9

6.0

4.7

4.0

3.3

EV/EBITDA

32.0

20.6

16.4

13.1

EV / Total Assets

112.3

10.4

7.1

4.9

Per Share Data (Rs)

EPS (Basic)

21.3

22.1

30.3

36.4

EPS (fully diluted)

21.3

22.1

30.3

36.4

Cash EPS

24.0

32.3

35.2

41.9

Book Value

65.8

96.1

132.5

Returns (%)

ROCE

280.8

330.8

44.7

38.6

33.6

Angel ROIC (Pre-tax)

89.7

349.2

357.4

ROE

1.7

33.5

31.5

27.5

Turnover ratios (x)

Asset Turnover (Gross Block)

4.1

12.1

9.9

5.0

5.2

Inventory / Sales (days)

Receivables (days)

Payables (days)

Working capital cycle (ex-cash) (days)

(55)

(19)

April 20, 2018

Matrimony.com Ltd| Initiating Coverage

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

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offering of securities of the company covered by Analyst during the past twelve months.

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Disclosure of Interest Statement

Matrimony.com

1. Financial interest of research analyst or Angel or his Associate or his relative

2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives

3. Served as an officer, director or employee of the company covered under Research

4. Broking relationship with company covered under Research

Ratings (Based on expected returns

Buy (> 15%)

Accumulate (5% to 15%)

Neutral (-5 to 5%)

over 12 months investment period):

Reduce (-5% to -15%)

Sell (< -15)

April 20, 2018