Down 40% in six months, this stock is consensus buy; up to 60% upside seen!

Cartrade Tech Ltd shares have fallen 40.33 per cent in the past six months. Yet the stock stayed a consensus 'Buy' with its average target price suggesting strong potential returns. The fresh brokerage to join the bandwagon is InCred Equities, which initiated the coverage on the stock with 'Buy' rating and a target of Rs 2,953. On Wednesday, CarTrade was quoting at Rs 1,843.10, down 2.40 per cent. InCred's target on the scrip suggests a potential 60.21 per cent upside over the prevailing price.

CarTrade’s cost base is entirely fixed – staff, technology, infrastructure & security do not scale with volume. InCred Equities said OLX India, acquired in August 2023 for Rs 523 crore, has emerged as CarTrade's potentially largest long-term opportunity. The management, it said, has begun rolling out a multi-product monetisation stack including Elite Buyer Program, Trust Verification, Elite Seller Program and Featured listings.

"Each one of these products monetises a base that is today earning zero revenue – the economics therefore flow almost entirely to Ebitda given zero traffic cost, a fixed engineering team, and shared infrastructure with CarWale," InCred said.

As monetisation deepens across 60 lakh buyers and 20 lakh sellers per month, OLX revenue growth can accelerate materially from the current 12–17 per cent run rate, InCred said.

"We initiate coverage on Cartrade Tech with a Buy rating and a target price of Rs 2,953. The company is at a clear inflection – all three segments firing simultaneously, operating leverage converting incremental revenue almost entirely to profit, and a debt-free balance sheet with Rs 1,250 crore in cash providing strategic optionality," InCred Equities said.

InCred's target factors in an expected 29 per cent growth over FY26–28, compounded annually. It also sees sustained Ebitda margin expansion from 33 per cent in FY26 to 40 per cent by FY28, an asset-light, debt-free, cash-generative platform model with 95 per cent organic traffic, and the strategic optionality embedded in Rs 1,250 crore of net cash.

Earlier on May 7, Nomura India said OLX has strong potential and the company is taking a number of initiatives to drive monetisation and increase transaction volumes, which should drive strong growth.

This can aid further margin expansion as well, given a limited cost structure.

"The consumer business can sustain a 22 per cent revenue CAGR over FY26-28F, led by rising competition in the PV industry, and higher digital ad spends, and we see limited threat of disruption from AI for Cartrade," it said while suggesting a target of Rs 2,740. This target suggests a potential 49 per cent upside.

Citi has a target of Rs 2,520 on the stock. JM Financial last week called CarTrade as one of the fastest growing classifieds plays in India at the moment. The risk-reward is also favourable, it said. The brokerage feels that while New Auto growth may gradually normalise from the elevated levels reported in the last few quarters, operating leverage remains strong across businesses. It expects CarTrade to sustain 17 per cent three-year revenue CAGR with Ebitda margin reaching 44 per cent by FY29. This brokerage suggested a target of Rs 2,340 on the counter.