CarTrade Tech stock target price raised with bullish outlook; analysts expect 45% upside

New Delhi NEW DELHI : CarTrade Tech share price jumped over 6% on Friday after domestic brokerage JM Financial raised its target price by 10% to ₹ 1,120 from ₹ 1,020, citing a potential upside of 45% for the firm. The firm has retained its ‘buy’ recommendation for the used vehicle dealer company’s shares. CarTrade Tech share price opened at ₹ 774.65 per share on the BSE today, the stock touched an intraday high of ₹ 823.55 and an intraday low of ₹ 771.55.

“The stock has witnessed good volumes during the recent rally. Volumes are low on correction and there is good support around 775 which is the 89 DEMA support. Thus, downside seems limited for the short term,” said Ruchit Jain, Lead Research Analyst at 5Paisa. As per the brokerage’s analysis, with chip shortage improving and automakers meeting pent-up demand in FY24, we seem to be returning to normalcy, with reported inventory around 45-50 days, which is at par with pre-Covid levels. As stated earlier in their report, original equipment manufacturers (OEMs) reduced their advertising spends due to their inability to meet current demand. As supply normalises, the brokerage house estimates that OEM advertising spends and dealer lead buying will outpace auto sector revenue growth in FY25. “Further, we reiterate expectations of a continued uptick in the remarketing segment, while OLX will benefit from picking low-hanging fruits such as ad integration, price hikes and integration with CarWale Classifieds,” the brokerage said in its report. Inventory at dealer level is at pre-Covid levels

Based on data provided by the Federation of Automotive Dealers Associations (FADA), dealers had an average of 50-55 days of passenger vehicle (PV) inventory as of February 24.

According to an analysis of retail sales against wholesales data by the brokerage, dealers had around 50 days of inventory as of May 24. This is comparable to the pre-Covid level of 45 days, indicating more balanced supply-demand dynamics. Retail sales grew ~8% YoY in YTDFY25, reflecting strong demand and premature concerns about a slowdown in the Indian car sector.

“Such a scenario with normalised inventory levels and sustained demand will result in OEMs spending more on advertising, thereby helping drive strong growth in CarTrade’s new auto segment,” the brokerage said.

OEM ad spend will return to 2.5% of revenue

Due to supply constraints, the auto sector reduced its advertising expenditure (as a percentage of revenue) by around 2% in FY22. This was significantly lower than the pre-Covid steady state rate of 2.5%.

“Our industry research shows that ad spends grew marginally to 2.1% in FY24, but ad budgets are expected to grow faster than new auto price hikes in FY25-26,” JM Financial said in its report.